Are you also looking for making a partial pre-payment against your home loan?
After a few years of paying back your housing loan, you might elect to prepay the loan if all of a sudden, your finances improve. Certainly, a possible solution to relieve your EMI load is loan prepayment. To determine how much you would save on interest and how it will affect your home loan EMI, use the house loan part prepayment calculator if you are considering making a partial prepayment on your home loans. It is an excellent and user-friendly financial tool to see the results. Just enter the loan amount, tenure, interest rate, instalments paid, and prepayment amount and get a result.
Understanding the intricacies of home loan prepayment can be a daunting task. It’s not just about paying off your loan early; it’s about making informed decisions that can save you money in the long run. To help you navigate this complex process and make the most of your financial decisions, you can read more about the various strategies and tools available to you. Knowledge is power, and with the right information, you can take control of your financial future.
Before working principle of home loan calculator repayment let’s understand what loan prepayment is.
What is home loan prepayment?
Yes, exactly home loan prepayment means the same as what you are thinking and as it sounds!
Prepayment of a house loan is when you pay off your loan in full or in part before the term is up. It must be paid in addition to the EMI instalments. Home loan prepayment occurs because of increased total interest costs caused by longer loan terms. When trying to lessen your debt load, it is a good approach to lower your interest rate.
Home loan prepayment typically results in either a decrease in EMI or a shorter loan term. Prepaying your debt results in significant interest savings in either case.
However, you must be aware of the prepayment fees you will have to pay before choosing to prepay your loan to determine whether it is a wise decision.
This is where a house loan calculator repayment comes in handy. Now it’s time to understand how a home loan part prepayment calculator works!
So, let’s move ahead towards the working principle of home loan calculator repayment!
An online tool that might help you calculate the possibility of how much you can save from prepayment is a house loan part prepayment calculator. When you go for prepayment, the majority of online house loan part prepayment calculators will assist you in determining four key loan parameters. –
The proportion or amount of EMI saved.
Amount due for an EMI.
The updated EMI amounts.
updated loan term
You may calculate your revised EMI amount and how much you can save with this method.
This house loan calculator repayment is simple to use, unlike manual calculations, which may be difficult and time-consuming. Simply enter the following loan details:
- Outstanding loan amount
- Loan term
- Interest rate
- Instalments paid
- Desired prepayment amount.
Simply click “Calculate” after entering this information to see how much interest you will save by paying off your loan early. On the screen of your device, you can now see your overall savings because of selecting the loan prepayment option.
Who is eligible for making home loan prepayment?
If the lender accepts it, anyone can make a full or partial payback on their outstanding loan. Some lenders forbid prepayment since it could result in losses for them. And this is why checking the prepayment clause before you sign your home loan agreement is crucial. If possible, you should also find out if your bank imposing any penalty for early loan payback.
What are the charges for Home Loan Prepayment?
The central bank has established some rules for banks and housing finance companies (HFCs) regarding house loan payments.
Look at these recommendations:
When banks and HFCs may impose prepayment penalties include:
- If you are a non-individual borrower, banks and HFCs may impose prepayment penalties.
- If it is about fixed-rate loans, banks may impose prepayment penalties.
- If a borrower prepays a fixed-rate loan by taking out a new loan from another bank or HFC, the HFC may impose a penalty.
- If the loan is a dual-rate loan, where the home loan interest rate is initially fixed, the bank may impose a prepayment penalty if the prepayment is made under a fixed-rate loan.
When banks and HFCs are not permitted to impose prepayment, penalties include:
- Banks are not permitted to impose prepayment penalties on consumer loans with adjustable interest rates.
- If an individual borrows a fixed-rate loan and repays it with their own money, HFCs are not allowed to impose a prepayment penalty.
- If the loan has two rates, HFCs are not allowed to impose a prepayment penalty if the borrower repays the loan when the floating-rate loan is in effect.
Considerable things before making Home Loan Pre Payment:
1. Age of the Borrower
It is ideal to prepay your mortgage before retiring if you are close to doing so. You are more likely to fall behind on your mortgage payments once you retire and lose your job.
2. Required funds in the future.
Before making a prepayment, you should also think about your future financial needs. Your funds will be gone once you pay off your home loan, which is typically a large sum. Before you decide, be certain that you are aware of your financial intentions.
3. Tax Saving
You cannot receive income tax advantages if you pay back your mortgage. Currently, Section 80C allows you to claim a tax exemption of up to Rs 1.5 lakh per year on principal amount repayment. Additionally, you may claim an exemption of up to Rs 2 lakh for interest paid under Section 24(b). Additionally, the finance minister expanded the benefits of Section 80EEA in the Union Budget 2021–22, allowing an extra deduction of Rs 1.5 lakh on interest (over and above the Rs 2 lakh permitted under 24b).
4. Savings from prepayment
Only if you stand to save enough on your interest expenses should you think about prepaying your mortgage. You could avoid prepaying your mortgage if you are not saving a sizable sum. For instance: The interest portion of your EMI is significantly lower in the later years of a house loan than it is in the early years. Therefore, you won’t save much if you prepay the debt during the last years of the loan.
5. Possibilities for investment
The savings you’ll get from prepaying your mortgage should be compared to the profits on any other investment possibilities you may have. It is preferable to invest your money if the returns are higher than to use it to pay off your mortgage early.
From the above-mentioned things, you must have understood the things which are considered before making pre-payment of a loan now heading towards the benefits of the home loan part prepayment calculator.
What are the benefits of a home loan part prepayment calculator?
You may manage your finances effectively by utilising a home loan calculator repayment to determine whether making a prepayment on your loan is profitable. It enables you to lower the amount of the outstanding loan and lower the EMIs. The cost of the loan is further decreased because of the decreased home loan interest rate outlay.
Only if you are saving a sizable amount towards your loan then you should think about prepayment. But get in contact with us at HDFC Bank if you’re seeking a balance transfer to lower your EMI. We provide the greatest services for your housing loan.
Start by estimating your costs using our online home loan part prepayment calculator.