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Home Loan Prepayment – 5 Important Points

Home Loan Prepayment
Home Loan Prepayment

Home Loan Prepayment is financially beneficial for Home Loan Borrowers. It helps to reduce Interest burden thus overall cost of property. Any type of debt including Home Loan is not good for financial health of an individual. Average Home Loan tenure in India is 8 years which means Home Loan Prepayment is preferred by borrowers to clear off Home Loan. Normally Home Loan Prepayment is done when we receive annual bonus or any exiting investment mature. As i mentioned in my other posts also that Home Loan Interest increase the overall cost of property. Assuming, your current Home Loan ROI is 10% and you have availed 80% of property value as Home Loan. In present scenario, average appreciation in property value is 5%. Infact in few cities, there is a drop in property prices during last 1 year. Effectively your property value is depreciating by approx 3% on yearly basis if it is on Home Loan. I have also explained these points in detail in my post 5 Disadvantages of Home Loan. To summarize, Home Loan eats into return from your property.

Now you must be wondering, What about Home Loan tax benefits i am availing on Home Loan Principal and Interest. You are right but considering average Home Loan ticket size of 40 lakh. 1st year interest outflow will be approx 4.03 Lakh @ 10.15% ROI. For Self-occupied property borrower will claim interest deduction of 2 lakh. Now catch is that Borrower has to forego Tax benefit on HRA allowance which is never accounted in cost benefit analysis calculation even by well known Financial Planners. In same case, considering EMI will be 39k per month for 20 year Home Loan thus monthly income of a borrower must be approx 97.5k. With conservative basic salary of approx 58k i.e. 60% of Post tax salary borrower must be claiming HRA of Rs 23400 per month @ 40% of Basic Salary. HRA benefit cease to exist in case of self occupied property. In short, we need to account HRA loss of approx 2.8 lakh from Income tax calculations which will square off the income tax deduction of 2 lakh towards Home Loan Interest. 

I am not saying that we should not avail Home Loan but at every time we receive some funds, we should utilize Home Loan Prepayment option to clear Home Loan asap. Home Loan is required because it is not feasible for middle class to save huge sum upfront to buy their dream home without availing Home Loan. Infact Home Loan is responsible for the growth of Real Estate Sector. While making Home Loan Prepayment, lot of doubts creep into the borrower’s mind. Lets check out 5 such important points which will help to clear doubts related to Home Loan Prepayment

Should i invest or make Home Loan Prepayment  

The biggest doubt in the mind of a borrower :). Recently one of my client Pooja Goel from Chandigarh asked me same query. She received her annual Diwali bonus of Rs 3 lakh in the month of October. She was in a dilemma whether to invest this amount or make Home Loan Prepayment.  I asked her where she is planning to invest this money. She gave me 2-3 options like Bank FD, Post Office Savings Scheme or PPF. In all these options, max return which she will be able to generate is upto 8.5%. Now i asked her that with an investment of 3 lakh and return of 8.5%, she will get max returns of approx Rs 25500 p.a. Alternatively, if she opt for Home Loan Prepayment then she will save Rs 30450 p.a. towards Home Loan interest. Between 2 which is wiser option. Without any doubt answer was prepayment of Home Loan. Sometimes due to bias, we fail to identify lost opportunity.

At the same time i suggested her that if she is confident of generating annual returns of more than 10.15% (Home Loan ROI) through investment tool then it will be wiser decision to invest the bonus amount. In short, Home Loan Prepayment is better option in majority of cases as average returns is in the range of 8%-9%.

Should i reduce EMI or Home Loan Tenure

Another dilemma in the mind of a borrower whether to reduce EMI or Home Loan Tenure at time of prepayment. By default, Home Loan tenure is adjusted/reduced on Home Loan Prepayment but some borrowers opt for reduction in EMI amount. I always suggest my clients to reduce Home Loan tenure instead of EMI. Reason being, it will help to reduce total interest outflow. Financially it is more beneficial to reduce Home Loan tenure instead of EMI otherwise there is no monetary benefit of Home Loan Prepayment. Besides Home Loan Prepayment to reduce interest outflow, it is always advisable to increase EMI amount as and when Salary level increase.

Who can make Home Loan Prepayment?

Life is zero sum gain therefore if Home Loan Prepayment is beneficial for borrower so it is financial loss for Home Loan provider. Banks borrow money based on long term commitment. Funds received through Home Loan Prepayment needs to be re-deployed by bank through credit channel which is cost to banks. Normally banks discourage borrowers to prepay. One of the most common way to discourage is that bank refuse to accept prepayment if the borrower is unable to visit the branch physically. In IT age, it is surprising that facility of online prepayment is not enabled by almost all Home Loan providers for prepayment of Home Loan. I would like to clarify that if borrower is not present physically then he/she can issue letter of authorization to any of his representative who can make Home Loan Prepayment on the behalf of borrower. There is no restriction in this regard as the banks point out.

Do’s & Don’ts of Home Loan Prepayment

I am listing imp do’s & don’ts when you plan to prepay Home Loan

1. Kindly carry your Govt issued photo id proof like PAN, Driving License, passport etc.

2. You should also carry your cheque book because besides cheque towards Home Loan prepayment, you also need to pay Simple Interest for the month towards principal being prepaid e.g. if you are making a prepayment of 5 lakh on 20th of the month then this principal amount will be adjusted in your Home Loan account w.e.f 1st of same month. You need to pay simple interest for balance 20 days for which you need another cheque leaf.

3. Don’t forget to take acknowledgement of payment. Acknowledgement will also mention principal outstanding after prepayment and balance Home Loan tenure or new EMI as the case may be. Acknowledgement should be signed and stamped by the authorized representative of the bank.

4. In case, your EMI is debited through cheques and your EMI is reduced/revised post prepayment then you need to issue fresh cheques with revised EMI amount. Don’t forget to collect the unused cheques from bank to avoid misuse.

5. Please mention your Name, Home Loan Account and Mobile No behind all the cheques.

6. Some banks insist on source of fund for Home Loan Prepayment therefore kindly carry last 6 months bank statement of bank account from which you are prepaying the amount.

Updation of Prepayment details in CIBIL database

Last but not least, it is critical that Bank update your Prepayment details in CIBIL Database. Your current balance against Home Loan account in CIBIL report will be updated with revised principal outstanding. Normally CIBIL database is updated within 45-60 days from the date of payment. After 60 days, pull out your CIBIL report to check the same. Now you must be wondering why it is important at the time of prepayment. Answer is very simple, your overall credit worthiness depend on balance outstanding. Home Loan Prepayment will reduce balance outstanding and increase your credit worthiness which will improve CIBIL score.

I covered all the important points related to Home Loan Prepayment. Hope you liked the post. You can post your queries or share your views, comments and feedback on this post through following comments section.

Copyright © Nitin Bhatia. All Rights Reserved.

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Arun
Arun
9 years ago

Very informative. I went through all the steps you have mentioned when I made the prepayment. Nice write up!!!!

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Arun

Thanks for liking the post.

rajiv ahuja
rajiv ahuja
9 years ago

Nice analysis.

Deepak
Deepak
9 years ago

Dear Nitin,

I am looking for a home loan for an individual house. Couldnt get it from SBI since there is a slight deviation in the house compared to approved plan.

Axis bank, LIC housing and ICICI banks are ready to give loan.

My requirement is 2000000INR for 10 Years.

An executive from Axis bank visited my place today and explained abt the loan. He started telling that in the application form, mention 30Lakh Rs so that finally they will give 20Lakhs(Because they will give 80% of what we ask). Is this statement true? Can I go ahead and enter 30Lakhs in the application form though I need 20Lakhs only?

They are offering 10.15% + 0 Margin and ICICI is 10%+0.15 Margin. Which one do you suggest is the good option for me?

Also the executive was pushing me to apply for life insurance!! is this a good option to go with?

Thanks.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Deepak

The information shared by Axis Bank DSA is not correct. Normally Home Loan approved is 80% of Property value excluding stamp duty and registration charges. Also it depend on Home Loan eligibility of a borrower. You may check my post on how Home Loan Eligibility is fixed
https://www.nitinbhatia.in/home-loan/home-loan-eligibility/

Between ICICI Bank and Axis Bank, i will suggest Axis Bank because Rate of Interest is linked to Base Rate of the bank.

I will not suggest any Home Loan Insurance. Please check my following post
https://www.nitinbhatia.in/home-loan/7-reasons-why-you-should-not-buy-home-loan-protection-plan/

Deepak
Deepak
9 years ago
Reply to  Nitin Bhatia

Hi Nitin,

Thanks for your kind reply.

Executive from Axis bank was telling Property Insurance is mandatory! Personal and Health insurance I can decide whether to opt for it or not!!

And about amout, if I want 20L loan, could you pls suggest, how much should I put in my application form?

Thanks

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Deepak

Home Loan / Life Insurance is not mandatory. You may opt for property insurance, which will cost only few thousand rupees and it is mandated as per Home Loan agreement.

Between ICICI bank and LICHFL, i will suggest ICICI Bank.

For any personalized consultation /queries on home loan application form etc on chargeable basis, you may contact me at +91 94800 21000 or mail me at info@nitinbhatia.in

Praful
Praful
9 years ago

Hi Nitin,

Thank you again for this wonderful article. I need your advice on one query.

Which option is better – making prepayments or increasing EMI?

Thanks,
Praful

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Praful

You should prepay, if you receive any lump-sum amount e.g. annual bonus. EMI should be increased with the increase in income levels e.g. if month income is increased by Rs 10000 then you should increase EMI by atleast Rs 4000.

Praful
Praful
9 years ago
Reply to  Nitin Bhatia

Thanks

Raja
Raja
9 years ago

Hi Nitin,
My loan amount of 20L got approved in hdfc and disbursed 10L as well to me. Now I am paying simple interest. Meantime I got some money from other sources and completed my construction using that money. I want to start my EMI for the amount 10L which was disbursed so far. Is this possible? Bank will charge anything extra?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Raja

You can start FULL EMI. You can submit request with HDFC. There is no additional charge for this switch.

siddu
siddu
9 years ago

Hi Nitin,
i am buying a flat which is under construction.As you suggested, i would like to go with syndicate bank. And they are interested in my profile and ready to give loan. But they are asking builder’s license and permissions and other stuff regarding property. But my builder insists me to go with HDFC home loans as they tie up with them and was saying everything will be cleared easily. The builder also threatening me like if go with the bank, he will give only documents what they have. He won’t provide a single document other than what he has if bank people asks for more documents.
Is there any chances for rejecting loan from syndicate bank, when it is already approved buy HDFC etc. till now, we didn’t made agreement with the builder. The builder was saying he also charge interest if bank delays the process and disburse the amount in proper time if we go with other bank. we just gave some amount in advance.
the last doubt is, if we go for HDFC now, what will be the minimum period that we have to be with them after that i would like to transfer to other bank.

Thanks& Regards
Siddu

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  siddu

Every bank has different process for Risk Assessment. You may check what documents are required by Syndicate Bank and are not available with the Builder. If you go with HDFC then you will not get access to most of the project documents I always suggest to avail Home Loan from bank which is not in panel of the builder.

You can transfer Home Loan anytime and there is NO Waiting period.

Deepak
Deepak
9 years ago

Hi Nitin,

I have applied for Axis Bank home loan and the loan got sanctioned. Now they are verifying the property documents before disbursal. I have given them 2 previous sale deeds and latest tax paid receipt, khatha certificate taken in 2007, EC and few other documents.

Now the bank ppl are asking me that i have to produce Latest Khatha Certificate and Khatha Extract and Title Deed for 13 years!!

Is sale deed not a title deed? if not where can i get this title deed?
And as I have given them Khatha Certificate taken in 2007 and Latest Tax Paid Receipt, is latest Khatha certificate really required?

Thanks.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Deepak

i concur with bank, you need to provide latest khata certificate.

I think bank is referring to mother deed as title deed. You can clarify the same from bank. It seems one of the sale deed is missing. You can find details of this title deed from last sale deed executed by current owner.

Ashish
Ashish
9 years ago

Hi Sir,

I made prepayment of total 598092/- on 25th Feb which includes (594048/- against principal + 4044/- interest on prepayment). I am not sure how interest part was calculated. My EMI gets deducted on 15th of ever month. ROI 10.25%. and total loan availed is 2661140

/-. Could I have done something to reduce this interest, like visiting bank at earlier or at later date.
Please comment.
Thanks & Regards,
Ashish Nahar

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Ashish

Interest is calculated as simple interest for the month in case of prepayment. As i calculated, interest seems to be OK.

Anand
Anand
9 years ago

Hello Nitin,

I’m planning for repricing my home loan. Current outstanding amount is Rs. 2168414/- (ROI – 10.25%) and remaining EMIs = 79. If I pay a conversion amount of Rs. 5618/- loan term will be reduce from 79 to 77 with 10.10%.

Is it a correct option to reduce term? OR considering recent RBI announcement regarding cut off in repo. rate, need to wait for some more time.

Please suggest.

– Anand K.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Anand

You may wait for 2 week or so

Anand
Anand
9 years ago
Reply to  Nitin Bhatia

Thank You Nitin…!!! Will do… Wish You Happy Holi. :)

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Anand

Thanks..Wishing you and your family a very Happy Holi !!

Sumit
Sumit
9 years ago

Hello Sir.

Can U please send the format of letter of authorization for pre-payment.
Or any simple application to bank is OK in this regard.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Sumit

Any personalized consultation which require drafting or calculation is available on chargeable basis. You can mail me at info@nitinbhatia.in for same.

Shirisha D
Shirisha D
9 years ago

Hello sir.
I have a home loan from BOB for 15 lakhs, 10 years duration. The loan started from feb 2010. I have few plans-to go for prepayment of entire amount, or to increase the EMI & close it early(2-3 yrs). which one will be good to me.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Shirisha D

I suggest to prepay

Shashank G.
Shashank G.
9 years ago

I have a home loan from DHFL for 20.48 lakhs 20 years duration at 10.6% ROI. my current EMI is 20576. I am in the good financial condition to increes my EMI up to 25000, also I saved more then 5 lakhs in couple of years.
should I make Pre payment of 5 lakhs or increes my EMI up to 25000.
which is the best way to save interest amount?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Shashank G.

You should make prepayment. Also if feasible, you can increase EMI.

Nitin Bhatia
Nitin Bhatia
9 years ago

You can prepay anytime if is floating interest home loan. To increase in EMI, you can submit written request. You have to contribute 20% from your pocket for this transaction, if you have more funds then you can prepay home loan.

Vijay
Vijay
9 years ago

Hi Nitin,

I have opted for SBI home loan for 15 Yrs [Rs 34L], Flat is under construction and EMI is around 37000/- ,bank has releases almost 20 Lakhs in last 6 month (14 Lakh is yet to be released as the construction progress ) . i have 2 lakhs in my hand ,should i pay this money directly to bank (i.e. actually before the possession ?) what should i ask to bank for maximum benifit

Please advise.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Vijay

Your query is not clear but i am assuming that you would like to prepay the Home Loan. You can prepay before possession.

rupesh
rupesh
9 years ago

Hi Nitin

I ahve taken a home loan of 19 L from LICHFL in may 2008. My monthly Emi is 19000.now i have got around 20 L from my other souces. Can you pl tell me how much will be required to kill the loan. i want to get rid of the whole loan amount.

Thanks and regards

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  rupesh

You may ask for loan closure statement from LICHFL to check current outstanding balance.

Ajay Nawankar
Ajay Nawankar
9 years ago

Hi Nitin,
I have taken 12.5 lac home loan from HDFC in 2010 and currently interest rate showing me as 12%. Current principle outstanding is around 8.75 lacs and I have surplus amount which I can use to clear all of the loan amount. What would you advice?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Ajay Nawankar

Firstly, you should pay conversion fees and reduce your ROI. Secondly, you can prepay the Home Loan.

Ajay Nawankar
Ajay Nawankar
9 years ago
Reply to  Nitin Bhatia

Thanks Nitin for your response, I think second option is better for me as it will also give me peace of mind that there would be no loan/ debt. Would clear home loan around end of this month so that I don’t have to pay simple interest that much, I hope my thinking is correct.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Ajay Nawankar

That’s correct

Shaz
Shaz
9 years ago

Perfectly written article I have ever seen. no one should ask any question after reading it properly or thoroughly. Excellent piece of work.. Thanks a lot.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Shaz

Thanks for liking the post !!!

Nishant
Nishant
9 years ago

Hi Nitin,
Very informative article. Thanks for sharing.
Need your advice. I am paying monthly EMI of INR 26,000 for home loan of 16 lacs from SBI. I am leaving for a foreign assignment for my company and will be having INR 50,000 extra every month for approx one year. Can I prepay this extra saving every month or should I save this money and pay it in one go?
Thanks in advance.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Nishant

Firstly, you need to inform SBI in writing that you are leaving India for long duration. Secondly, you may find it difficult to prepay from overseas location therefore you can increase your EMI before leaving India.

Sunil Gupta
Sunil Gupta
9 years ago

Hi Nitin
I hv taken a H/L of Rs 19.55 Lacs from LICHFL. My EMI is 18900 for 20 years. Current ROI is 11.75%. I hv Surplus Fund of Rs 2 Lacs. What shud I do prepay or invest in FD. I am in process of transfer of H/L to SBI.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Sunil Gupta

You can pepay and then immediately transfer to SBI.

Murugan
Murugan
9 years ago

Hi,

I have taken H/L 20 Lacs from LICHFL in 2012, my monthly EMI 22660/ – as per my current and next 2-3 years situation, I couldn’t able to repayment any extra amount apart from my EMI.

current principal outstanding is 1,769,927 and ROI – 10.90

If we pay repayment during initial stage (Winin 5 years), we can save so much interest.

So I have decided to take Jewel loan (2 lacs) and repay the homeloan, because Jewel loan interest rate is low.

is it good decision? kindly suggest me..

Thanks
Murugan

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Murugan

It’s a good decision. Also you are paying higher interest rate. You can transfer your Home Loan to banks like SBI or ICICI Bank to reduce your interest rate from 10.90% to 9.90%.

Bhasu Batasha
Bhasu Batasha
9 years ago

namaskaar nitin ji,
first of all thanx for giving us such valuable information about prepayment of home loan.
I have taken H/L 22 Lacs from HDFC Ltd on floating. I want to pre-pay an amount of approx. 6 lacs towards my H/L. For this purpose i am planning to get loan of Rs 3 lac from my department’s cooperative society and one of my friend is also giving me Rs 3 lac by taking loan from said society. The interest rate of society is less than HDFC and that too on reducing balance. Society will give me A/c payee cheque in my name and my friend will also give me A/c payee cheque. My query is that can i make prepayment to HDFC by this way as in their t&c it is mentioned that part payment of HL should only be from OWN SOURCES. Pls guide me about this own sources clause and suggest what should I do?

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Bhasu Batasha

It is perfectly OK. By own source means prepayment should be from your bank account. HDFC is not concerned from where you are arranging funds.

Bhasu Batasha
Bhasu Batasha
9 years ago

thank u so much for ur reply.
I have one more query, I have taken H/L of 22 lac on 29th May’2015. HDFC Ltd. person has suggested me to go for HDFC Ergo Home Suraksha Plan. The premium for 22 lac cover is around 64500/- for five years. He is telling that the premium is part of home loan only. And if in case of foreclosure of H/L the amount of premium will be refunded by deducting 20% per year. Pls suggest me whether i should continue with it or otherwise.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Bhasu Batasha

I will not suggest

Shamy
Shamy
9 years ago

Dear Mr Nitin – The information is very helpful. It answered most of my questions. Now I need a suggestion –
I have two home loans – 12 Lac which started in Feb 2013 (house in which I live) and another of 22 L (Jan 14). The one with 22L is on rent generating an income of 12500 per month. I can pay approximately 100000 in December 15 as a prepayment. Considering I get the tax benefit of interest (with no limit) on the rented property and only upto 150000 tax benefit on the property I live, for which property I should make the prepayment?

Additional Info:
Both loans are from HDFC
Both loans are at 10.55% as of current ROI

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Shamy

You should prepay home loan of self occupied property.

Jitendra Panchal
Jitendra Panchal
9 years ago

Hi Nitin! I had taken home loan from Axis bank 3 years back at 10.75%ROI,Now I want to Prepay all outstanding amount which is 5.70 lakh as on today.What should I do first?

Nitin Bhatia
Nitin Bhatia
9 years ago

You can prepay anytime. Please check my post on this page for imp points.

PARTH JOBANPUTRA
PARTH JOBANPUTRA
9 years ago

Hi, I have requested SBI for loan of 24lakhs my monthly inhand salary being 41K what is my max eligibility of loan with combination of tenure .
I mean am i elibigle for tenure of 15 years aswel or 20 years aswel if yes does EMI fits into my eligiblity.
They have sanctioned me loan of 24 lakhs for 30 years.but i feel tenure should be as less as possible.For 20 years i have to pay rs 30 lakhs as interest over my principal and for 30 yrs it comes out to be 50 lakhs.Also post sanction for SBI can i still ask to change the tenure to 20 from 30 since disbursement of cheque is yet not intiaited

Nitin Bhatia
Nitin Bhatia
9 years ago

Please check following post on Home Loan Eligibility

https://www.nitinbhatia.in/home-loan/home-loan-eligibility/

Dayanand
Dayanand
9 years ago

Hello NitinJi, Very informative post.And most important you had replied to all doubts posted by readers which is also very infromative.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Dayanand

Thanks for encouraging words !!!

Bharati
Bharati
8 years ago

I have two home loans – 12 Lac which started in Mar 2011 and another of 25 L March 14 (house in which I live). The one with 12L is on rent generating an income of 7500 per month. I can pay approximately 100000 in July 15 as a prepayment. Considering I get the tax benefit of interest (with no limit) on the rented property and only upto 150000 tax benefit on the property I live, for which property I should make the prepayment?

Additional Info:
Both loans are from HDFC
Both loans are at 9.9% as of current ROI

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Bharati

You may declare 25 lac Home Loan Property as let out and 2nd one as Self Occupied. You can consider notional rent of let out property for calculation of loss from let out property.

Suresh Rajendran
Suresh Rajendran
8 years ago

Hi Nitin,

Your prepayment article is as good as it can be. I have taken Home loan for 35L for 15 years with 2 years under Fixed rate & rest under floating rate.

How Soon can i start the repayment and the loan is 6 months over now & will there be any prepayment charges applicable incase if i want to increase my EMI with LICHF ???

Nitin Bhatia
Nitin Bhatia
8 years ago

There will be penalty for prepayment during fixed interest period. There will not be any charges to increase EMI.

EMI can be increased only from next month in which the request is submitted.

himanshu
himanshu
8 years ago

Hi nitin. ..I am reading thus article just now and perhaps late in getting help but will request if possible to reply…my name us Himanshu and carrying loan of around 20 lacs from hdfc. .after 4 yrs I could see there is no reduction in principle amount and today I made part payment if around 4 lacs giving benefit in emi reduction to 4000 approx…I am on rent and seeing possibility of possession will have to be on rent for next couple of years. ..
In reducing emi a bad option since I though at least I have reduced my burden of 4 lacs debt but tenure remain same
Pls suggest

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  himanshu

As i shared in my comments also that it is advisable to reduce Home Loan tenure instead of EMI.

Deepakk
Deepakk
8 years ago

Hello Mr Nitin, I have obtained Indian Bank housing loan 40L in Dec 2103 with EMI 39500/-pm. Now since 1.5year the outstanding is still 38.7L. Last year interest paid was 4.1L. Presently planning for prepayment of housing loan by amount 10L, about to receive from my past investment. And continuing repayment with EMI 39500/- till any such opportunity in future to come. I wish to know from you, 1) Would it be beneficial to make repayment of housing loan by 10L ? 2) How many times one can use facility of prepayment in loan tenor ? Thank you in advance.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Deepakk

You have not mentioned whether loan is floating or fixed. Also current ROI.

jagroop singh
jagroop singh
8 years ago

Hello Mr. Nitin,
Thank you for posting such a good article.
I obtained Home loan of 15L from PNB in Aug2014 at 10.25% floating ROI. Repayment tenure is 15 years and i am paying EMI of Rs. 16400. I was planning to increase the current EMi to 20000/- would it be beneficial. Alternatively I thought of borrowing 70000/- @11% on my Credit Card and make prepayment. This loan would be paid in 2 years and then again i can avail same offer from CC to make repayment. I would really appreciate your valuable thoughts on these options!
Many Thanks in Advance!!

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  jagroop singh

Increase in EMI is financially beneficial. I will not suggest loan against credit card to prepay Home Loan.

jagroop singh
jagroop singh
8 years ago
Reply to  Nitin Bhatia

Thank you Mr. Nitin for your reply :)

Amit
Amit
8 years ago
Reply to  jagroop singh

Hello Mr. Nitin,
Thank you for posting such a good article.
I obtained Home loan of 15L from hdfc at 10.25% floating ROI. Repayment tenure is 15 years and i am paying EMI of Rs. 16400. And i want to repayment of the loan 9lac can you told me the procedure and i reduce the emi and also the tenure. please suggest

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Amit

You can prepay through cheque and carry bank account statement. At the time of payment, you can inform HDFC that you would like to reduce EMI instead of tenure.

Amol Bhogale
Amol Bhogale
8 years ago

Hi Nitin, Question on Prepayment. I have home loan 35L with PNB and currently disbursed upto 22L to builder . also property is under construction. I thought of paying prepayment through PF account. Is it advisable to prepay principal amount now. Let me know.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Amol Bhogale

You may prepay

Murali
Murali
8 years ago

Helloo Mr. Nitin, I have taken 20 L loan from IDBI in July 2012 for 8 years. I have availed the IT benefits for the last 3 years. Now I have funds to the extent of loan outstanding ~14.3 L. Whats your advice? To close the loan OR invest elsewhere? Is there any penalty from IT if I close the loan this year. Thank you in advance for your valuable advice.

Regards,
Murali

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Murali

You may close your home loan. There is no penalty from income tax department in this case.

vandi
vandi
8 years ago

Hi Nitin,

I have a loan of Rs 60lacs from SBI. I was interested in prepayment but the bank manager told me that i can make minimum prepayment of 20% of the loan amount. But some of my colleagues were suggesting that it is not so and even less that 20% can be prepayed. Kindly suggest.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  vandi

There is a possibility that your Home Loan is sanctioned in some special scheme. I suggest you to check your Home Loan agreement for any such restriction. Under normal Home Loan there is no such minimum requirement for home loan prepayment.

Anita Rani
Anita Rani
8 years ago

Nitin,

Is it possible to prepay all your loan amount in one go with cash and if yes, would there be any IT issues in it?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Anita Rani

Bank will not accept cash. You can deposit cash in your account and prepay through cheque.

Ankur
Ankur
8 years ago

Hi Nitin,

Please suggest is there is any benefit to do prepayment of Home Loan on pre-construction property, if yes then on which year I can take benefit of pre-payment done, or if No so should I opt for it to decrease my loan tenure what you suggest?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Ankur

You may prepay. Tax benefits can be availed from FY in which you will receive possession.

zakeer shaikh
zakeer shaikh
8 years ago

I have home loan of 63 lakhs of last last month I have planning to pre payment of 30 lakh next year I mean within 1 year for reduce interest it’s possible

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  zakeer shaikh

It is possible. I am assuming your home loan is on floating interest rate.

Ankur
Ankur
8 years ago

Hi Nitin, thanks for the update, but I heard that prepayment of home loan can be claimed on self occupied property only, so If I am going to do prepayment on Preconstruction property, so is I am eligible to take benefit of it in coming FY whenever I got the possession.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Ankur

My apologies but could not understand your query.

Dipu B
Dipu B
8 years ago

Hi Nitin, great article. Thanks. Can you help me with a query? As you rightly pointed that HRA is lost in case of self occupied house. Now making prepayment and lowering the interest portion to below 2 Lacs (IT excemption) will be a total loss, right? Loosing both HRA and tax benefit. In such case would it be good to keep the interest portion as much as possible till 2 lacs and the funds can be utilised for investment.
Would eagerly wait for your expert views

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Dipu B

It depends on your tax bracket and how you would like to invest the same. Also the returns you are expecting.

Mohanram
Mohanram
8 years ago

Hi Nitin, I have home loan for 23 lacs, I am planning to prepay of 2 lacs, Is there any benefit for tax. All ready my salary PF contribution and Monthly home loan principle emi crossed 1.60lacs for 80 C.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Mohanram

Unfortunately there is no further tax deduction.

Mohan
Mohan
8 years ago

Hi Nitin, I have tried to make prepayment of 50K of my partial disbursement home loan, Bank has suggested to pay it to builder and requested not to request this 50K during next disbursement. And informed there is no point of paying it now and again asking to release some amount. I am not sure which is best option. Please advise

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Mohan

You may opt for either option i.e. prepay or make direct disbursement to builder. If you prepay then your interest outflow will reduce therefore if builder’s disbursement is 3-4 months away then prepay or wait for builder’s disbursement.

NM
NM
8 years ago

Dear Nitin,

Please let me know if i can do the prepayment of INR 10 lacs with the help CASH deposit with respect to Home Loans.
Also if i cant do it then how much maximum i can pay by the way of CASH prepayment ?

My provider is ICICI Home Finance.

Thanks

NM

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  NM

Request you not to spam the forum and post duplicate queries.

To answer your queries, home loan providers do not allow prepayment through CASH Mode.

MP
MP
8 years ago

Thanks for the great article. I have some surplus amount for each month about 15-18K after all expenditure and bit of savings. Can I take a personal loan around 5L and make a prepayment to reduce the my overall interest. My home loan 10 months old. Please advise?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  MP

I will not suggest.

Sujit Doshi
Sujit Doshi
8 years ago

Hi Nitin,

Thanks for the valuable information.

I have taken a Home loan of Rs 12 Lakhs from LICHFL in 2011.For the first two years ROI was fixed and now it is floating. My EMI is 11675 for 20 years. Current ROI is 11.75%. I have some Surplus Fund . I have initiated the take over process to SBI . What should I do:

Should I put this amount to prepay LIC loan OR should I wait to complete the take over process and then put amount in SBI loan
Can I Prepay LIC loan through NEFT ?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Sujit Doshi

You may transfer to SBI and then prepay as the process is already in progress.

Martin
Martin
8 years ago

Hello Nitin ji I am back with few more questions and thanks again for all your help.
My worry is now as you mentioned I re-paid my home loan almost 95% (all against principal) and last leg is 4.5 lacs but since I am back to India i need to declare in investement. question is I didnt pay anything against interest so how can I get benefit of 2 lacs( for HL int )? I will get 1.5 lacs for Principal but worried on interest as I didnt pay anything in my repayment against interest! please suggest.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Martin

If there is no interest payment then you cannot claim any tax deduction on same.

Martin
Martin
8 years ago
Reply to  Nitin Bhatia

Thanks. I think I lost that 2 lacs deduction on interest component…thus end up paying hefty Income tax. Is that not a lesson not to pay out home loan till you save more on interest at least 2 lacs can be deducted from overall income. I am now thinking I should have paid less by keeping 2 lacs of interest…almost 18-22 k is going in tax per month :(

hassan
hassan
8 years ago

Dear Niin,
Thank you very much for your such great forum.
I’m as a NRI planing to take home loan around 40 lac’s to buy a 2bhk flat in bangalore.I’m planing to take joint home loan with better half.i would like to know the good pre payment option to finish tenure asap.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  hassan

For floating interest home loan you can prepay without any penalty.

Siddhartha Saha
Siddhartha Saha
8 years ago

Sir,
Can you please clarify me that for HFCs like LICHFL is there any guidelines issued by NHB that the pre-payment can be made only by cheque or through cash? As LIC HFL employee informed me that they cannot accept online pre-payment of principal (Though, there is no pre-payment facility through online) as per extant NHB Guidelines?

Nitin Bhatia
Nitin Bhatia
8 years ago

You need to pay through Cheque / DD / Bankers Cheque. Online prepayment is not possible.

Amit Agrahari
Amit Agrahari
8 years ago

Sir, I have an home loan sanctioned for Rs 15.00 Lakh for 10 Years in Oct 12 from HDFC. The amount disbursed till date is 13.8 lakh. I am paying pre-emi. I have some surplus fund now. Can I pre pay the amount partially and at the same time wanted to reduce the tenure of loan from 10 to 5 yrs. Is it possible ?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Amit Agrahari

It is possible.

Amit Agrahari
Amit Agrahari
8 years ago
Reply to  Nitin Bhatia

Thanks

Shivashankar
Shivashankar
8 years ago

Sir, very good one sir. I want to take over my loan by dhfl from Lichfl. My site loan is 12L in 2011and housing oan is 20.5L In 2014. Out standing is 25L. Both are in fixed interest rate. Lic people asking for a 2% levy on outstanding loan amount. is there any way of reducing/ waiver the prepayment chargers. Kindly opine.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Shivashankar

Waiver is not possible. You may wait till loan is fixed interest home loan.

Pawan Prashar
Pawan Prashar
8 years ago

Dear Sir I have a plot purchase loan from HDFC Ltd of 15L for 10 years. I have an amount of 3Lacks in my salary account. Want to prepayment .What benefits i will get.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Pawan Prashar

Your interest outflow will be reduced therefore financial benefit to you.

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