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Home Loan Prepayment Calculator
Reduce EMI or tenure after a prepayment — with the after-tax benefit (§24(b)/§80C, regime-aware) and the RBI floating/fixed penalty rule. Accurate, instant and free — for India.
What these mean:
What these mean:
What these mean:
What these mean:
Prepaying clears the loan 54 months early, saving ₹19,29,852 gross (₹18,69,852 after Sec 24(b) erosion). Beat 12.86% pre-tax returns to favour investing instead.
Remaining balance — with vs without
186 mosGross vs. after-tax saving
Old regime: Sec 24(b) deduction capped at Rs 2 L/yr per borrower. Prepaying reduces future interest eligible for deduction.
No prepayment charge
RBI Directions 2025, effective 2026-01-01: floating-rate individual home loans are exempt from prepayment penalties.
Prepay vs. invest
Prepaying earns a guaranteed 9% after-tax (approx. 12.86% pre-tax at your 30% slab). Your investments would need to consistently beat that return to favour investing over prepaying.
Your modelled return: 12% p.a. (margin: -0.86%) — prepaying is the safer choice at this return.
How prepayment savings and the after-tax benefit are calculated
This calculator runs two parallel reducing-balance amortisation schedules — standard (no prepayment) and post-prepayment — and differences them to derive gross interest saved. It then applies the after-tax formula modelling the §24(b) deduction erosion under the old income-tax regime, self-occupied property.
Gross prepayment saving
Dual-schedule diff
Gross saved = standard total interest − post-prepayment total interest
- Both schedules use reducing-balance method
- Prepayment applied at specified month
- Reduce-tenure or reduce-EMI mode
- Supports multiple prepayments
After-tax formula (old regime)
§24(b) erosion at annual cap
afterTax = grossSaved − cappedLostInterest × slab
- cappedLostInterest = interest reduction capped at ₹2L/year (§24(b) limit)
- slab = old-regime marginal rate
- New regime: afterTax = grossSaved (no §24(b) erosion)
- 1Base EMI — ₹50,00,000 @ 9% / 20y: Monthly rate r = 9%/12 = 0.75%. n = 240 months. EMI ≈ ₹44,986. Total paid = 44,986 × 240 = ₹1,07,96,640. Total interest ≈ ₹57.97L.
- 2₹5L prepayment at month 1 — reduce-tenure: After month 1 EMI (interest ₹37,500, principal ₹7,486), outstanding ≈ ₹49.93L. After ₹5L prepayment: balance ≈ ₹44.93L. Recompute n at same EMI ₹44,986 and rate 9% → remaining ≈ 185 months. Total tenure = 1 + 185 = 186 months — saves ~54 months and gross interest ≈ ₹19L.
- 3After-tax adjustment — old regime, 30% slab, §24(b) ₹2L cap: Annual interest saved initially ≈ ₹1.9L (below the ₹2L cap), so some §24(b) deduction is eroded. At 30% slab, each rupee of lost deduction costs ₹0.30 in extra tax. Modelling §24(b) erosion on the annual cap basis: after-tax net saving ≈ ₹18.4L. Under the new regime (no §24(b)), after-tax saving = gross saving = ₹19L.
Models §24(b) erosion at the annual cap, old regime, self-occupied
No prepayment charge on floating-rate individual loans — RBI Directions 2025
The RBI Pre-payment Charges on Loans Directions 2025 (issued 2 July 2025, effective 1 January 2026) prohibit banks, NBFCs, and housing finance companies regulated by RBI from levying any prepayment fee on floating-rate loans to individual borrowers. This includes home loans, loan against property, and personal loans where the rate is floating (linked to an external benchmark such as RBI repo rate, EBLR, or MCLR).
Fixed-rate loans and co-borrower / commercial loans are not covered
| Loan type | Prepayment charge (post 1-Jan-2026) | Covered by RBI Directions 2025? |
|---|---|---|
| Floating-rate home loan (individual) | Nil (zero) | Yes — prohibited |
| Fixed-rate home loan (individual) | As per sanction letter (typically 2–4%) | No — check sanction letter |
| Floating personal / LAP (individual) | Nil (zero) | Yes — prohibited |
| Commercial / co-borrower (non-individual) | As per agreement | No |
Source: RBI Pre-payment Charges on Loans Directions 2025 (effective 1 January 2026). Verify current rules with your lender and the RBI website before acting.
§24(b) and §80C — old regime only
The old income-tax regime offers two home loan deductions: §24(b) on interest (up to ₹2L/year, self-occupied) and §80C on principal repayment (up to ₹1.5L/year, combined with other §80C investments). Neither applies under the new regime.
§24(b) — interest deduction
Old regime only, self-occupied
Cap: ₹2,00,000/year
Self-occupied residential property only
- Interest paid above ₹2L cap: no deduction
- Let-out property: full interest deductible (no cap)
- Pre-construction interest: deductible in 5 equal instalments from handover
- Prepayment erodes this deduction as annual interest falls
§80C — principal repayment
Old regime only
Cap: ₹1,50,000/year (combined §80C)
Shared with EPF, ELSS, NSC, life insurance, etc.
- Principal in regular EMI qualifies
- Prepayment principal also qualifies up to ₹1.5L combined cap
- Registration / stamp duty qualifies in year of payment
- New regime: §80C deduction not available
§24(b) erosion: prepaying can cost you deduction value
Reduce-EMI vs reduce-tenure — which to choose?
After a home loan prepayment, your lender typically gives you a choice. The decision affects both the total interest you pay and your monthly cash outflow.
Reduce-tenure (recommended)
Same EMI — more interest saved
₹5L @ month 1, ₹50L @ 9% / 20y
~54 months saved
~₹19L gross / ~₹18.4L net (old regime 30%)
- EMI unchanged → no FOIR impact
- Loan closes ~4.5 years early
- Best when monthly outflow is manageable
Reduce-EMI
Same tenure — lower monthly payment
₹5L @ month 1, ₹50L @ 9% / 20y
EMI ↓ to ≈₹40,480
~₹11L gross saved (less than reduce-tenure)
- Monthly saving ≈ ₹4,500/month
- Useful if FOIR is tight or income variable
- Saves significantly less total interest
Should I prepay the home loan or invest in SIP / FD?
The break-even between prepaying and investing depends on your effective after-tax home loan cost versus expected after-tax investment return. Under the old regime with §24(b), the effective rate for interest within the cap is lower than the nominal rate.
- 1Old regime, 30% slab, 9% home loan: For interest above the §24(b) ₹2L cap: effective cost = 9% (no deduction). For interest within the cap: effective cost = 9% × (1 − 30%) = 6.3%. An equity SIP historically returns 12–14% pre-tax CAGR over 10y+ — well above both thresholds — but with significant volatility. An FD at 7.5% beats the 6.3% effective rate on a risk-free basis, but not after tax (FD interest is taxable at slab: 7.5% × 0.7 = 5.25% net).
- 2New regime, 9% home loan: No §24(b) benefit, so effective cost = 9% for all interest. Break-even investment return on a risk-free basis: 9% (after-tax). Difficult to achieve risk-free. An equity SIP at 12–14% CAGR beats it on expected value — but not guaranteed.
- 3Cross-links: use these tools to model the investment alternative: Use the SIP Calculator to project what the prepayment amount grows to in equity mutual funds over the loan tenure. Use the Compound Interest Calculator for lump-sum or FD comparison.
Not tax advice — verify regime and eligibility with a CA
Frequently asked questions
Reduce tenure saves more interest; same EMI, loan closes faster. Reduce EMI lowers monthly outflow, saves less total interest. For ₹50L @ 9% / 20y prepaying ₹5L at month 1: reduce-tenure saves ≈₹19L gross vs ≈₹11L for reduce-EMI. See the Loan EMI Calculator for a general EMI + prepayment tool (any loan type).
No prepayment charge on floating-rate individual home loans as of 1 January 2026. The RBI Pre-payment Charges on Loans Directions 2025 (effective 1-Jan-2026) prohibit banks and NBFCs from levying prepayment fees on floating-rate loans to individual borrowers. Fixed-rate loans may still carry charges — check your sanction letter. See §1 below for the full RBI rule.
Under the old regime, §24(b) allows a deduction of up to ₹2L/year on home loan interest (self-occupied). Prepayment reduces this deduction — meaning some of the gross interest saving is offset by higher tax. This calculator models the §24(b) erosion. Under the new regime, §24(b) does not apply — gross saving = net saving. See Take-Home Salary Calculator to estimate your slab and choose the better regime.
The new regime benefits more from prepayment on a net-of-tax basis, because §24(b) does not apply — every rupee of interest saved is a genuine net saving. Under the old regime, if you were already claiming the full ₹2L §24(b) cap, a portion of the prepayment saving is offset by the lost deduction at your slab rate. At a 30% slab and ₹2L cap utilised, the after-tax benefit of prepaying is reduced by ₹60,000 per year of the annual interest reduction below ₹2L. Switch to the new regime calculation if you do not claim home loan interest as a deduction.
Break-even: after-tax home loan cost vs after-tax investment return. Old regime, 30% slab, 9% rate: effective cost for interest above the §24(b) cap = 9%; within the cap = 6.3%. Long-run equity SIP: 12–14% pre-tax CAGR historically — but with volatility. Prepaying is guaranteed; investing is expected. Compare using the SIP Calculator and Compound Interest Calculator.
Method, assumptions & references
Not tax advice — §24(b)/§80C apply to the old regime, self-occupied; verify your loan's terms and the current FY caps; fixed-rate projection. Reducing-balance method. Dual-schedule diff: standard vs post-prepayment amortisation. After-tax formula: afterTax = grossSaved − cappedLostInterest × slab; capped at ₹2L/year (§24(b) annual limit). Golden: ₹50,00,000 @ 9% / 20y → EMI ₹44,986, total interest ₹57.97L; ₹5L prepay @ month 1 reduce-tenure → ~186 months (~54 months early), gross saved ~₹19L, after-tax old-regime 30% ≈ ₹18.4L. RBI Directions 2025: effective 1 January 2026, no prepayment charge on floating-rate individual loans.
How we calculate this
Reviewed by Reckonist Editorial · Last reviewed 17 June 2026. Figures follow the methods and sources set out in our editorial standards.
Not tax advice — §24(b)/§80C apply to the old regime, self-occupied; verify your loan's terms and the current FY caps; fixed-rate projection.
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