Facebook TwitterLinkedInYoutubewhatsapp Start Planning for your Financial goals
Schedule Your Free Consultation
  • Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Holistic investment planners, financial planning Chennai, Private wealth management Chennai

Holistic investment planners, financial planning Chennai, Private wealth management Chennai

Financial Planning chennai India, Private wealth management chennai India, Investment Advisory India, Systematic Investment Plan, Mutual Fund SIP, Mutual Fund ELSS, Tax Saving scheme

  • Home
  • About Us
    • Who we are & What we do
    • Services
      • Financial Road Map
      • Retirement Roadmap
      • Asset Allocation Plan
      • Webinar
      • Money Management
      • Wealth Management
    • In the Media
    • Testimonials
    • What Makes Us Different
    • How we can help you
    • Specialties
    • Honors and Awards
    • Vision & Mission
  • Resources
    • Blog
    • Articles
    • Podcast
  • Ideal Client
  • Contact Us
DISCOVER 2 PRACTICAL WAYS TO PREPAY YOUR HOME LOAN

Discover 2 Practical Ways to Prepay Your Home Loan (With Customisable Excel Calculator)

by Holistic Leave a Comment | Filed Under: Loans

Listen to this article


“A housing loan is NOT a loan on your house;It’s a loan on your future income
that is secured by your house.”

Don’t you think owning a debt-free house, would make you feel much better?

Would you like to get over with the stress and burden?

Table of contents

  • What is Home loan prepayment?
  • Who is Eligible for Home Loan Prepayment?
  • What is a Home Loan Prepayment penalty?
  • Why do lenders charge prepayment fees on the home loan?
  • What to consider before prepaying home loans?
  • Advantages of Prepaying home loans
  • Disadvantages of prepaying loans
  • How can you Prepay your home loan?
  • What is Lumpsum Prepayment?
  • What is Top-up EMI Prepayment?
  • Should You invest or make Home Loan Prepayment?
  • Should you reduce the home loan’s tenure or the EMI?
  • Conclusion

Let’s get started.

“It always seems impossible until it’s done.” – Nelson Mandela

Owning a debt-free house is always a dream. To make that dream come true, you can try prepaying your home loan.

You may have some questions in mind, like,

    When will I be able to complete my home loan payment?

    Will I be able to prepay my home loans?

    How will I prepay my home loans?

    Are there any advantages or disadvantages in prepaying the home loan?

    Should I invest or make Home Loan Prepayment?

    Should I reduce the home loan’s tenure or the EMI?

This article is here to help you with understanding the concept of Home loan prepayment.

‘You don’t have to be a miser, just be wiser with your money.’ —Dorethia Conner Kelly

What is Home loan Prepayment?

Home loan prepayment is when you prepay over and above your regular EMIs ahead of time. This prepayment can either be in part or full.

Who Is Eligible for Home Loan Prepayment?

Anyone willing to prepay home loans can do so if the lender allows it. Some lenders do not allow prepayment as it causes loss to them. So do check before you sign the home loan agreement. Also, find if there is a penalty for prepayment.

What is a Home Loan Prepayment Penalty?

A prepayment penalty is a fee or charges that you have to pay to the bank for prepayment.
home loan burden

Why Do Lenders Charge Prepayment Fees on Home Loan?

You may imagine, why should we pay a penalty for making prepayments?

This is because some loans are designed to last a certain number of years and earn interest in the bank for that tenure. So in case of prepayment, the bank may suffer a loss. So to safeguard them from any potential loss this charge is levied. But not all banks charge prepayment charges.

What to consider before prepaying home loans?

1. Retirement

If you are close to retirement, it is best to prepay as you may not have enough funds after you retire.

2. Future needs

Before you prepay, check if you have any needs for which you will require money in the future. By prepaying you may completely exhaust your savings. Hence your future needs are to be considered before prepaying.

3.Emergency

Make sure you have enough money for an emergency. If you have enough money for an emergency and also have health insurance, then go ahead and prepay.

4. Investments

If you invest your money instead of prepaying, would it be profitable? That is, compare your savings from prepayment and the returns you would get if you were to invest that sum. If the returns are higher then go ahead and invest instead of
prepaying.

5. Home Loan Balance Transfer

First, check if you have the option of doing a Home Loan Balance Transfer. Home Loan Balance Transfer means transferring your home loan to another lender offering a lower interest rate. If a Home Loan Balance Transfer is possible, then do it before you think of prepaying.

Now we will see the advantages and disadvantages of prepaying home loans.

Advantages of Prepaying home loans

  • Prepaying home loans can free you from a big burden.
  • You can save a lot on interest and the saved money can be used to meet your other financial needs or for investing elsewhere. This savings is indirectly income earned.
  • The risk of losing ownership due to loan defaults gets mitigated.
  • Your overall liability decreases as you prepay your loan. Your credit score will increase, thus improving your creditworthiness.
  • If you anticipate that the home loan interest rates will increase in the future, it is beneficial to prepay.

Disadvantages of prepaying loans

  • If you have a self-occupied property, you can claim up to Rs. 2 lakhs (on interest) as a deduction.
    If you have a let-out property, you can claim the actual interest paid.

    For both self-occupied and let out property, you can claim up to Rs.1.5 lakh as a deduction (on principal).
    These are the tax benefits that you may lose if you opt for home loan prepayment.

  • By prepaying, you may end up with no funds and it becomes difficult in case of emergencies.
  • If you anticipate a decrease in home loan interest rates, it is better not to prepay.

Now we will see the ways in which you can prepay your home loan.

How can you Prepay your home loan?

Home loan prepayment can be done in two ways, either by,

1. Lump-sum prepayment (or)
2. Top-up EMI payment.

Now, we will see how these different methods of prepayment work.

Also read, “Warning: Don’t opt for EMI Moratorium! Discover why?”

1. What is Lumpsum Prepayment?

When you use a lump sum amount for one time prepayment, it is called as Lumpsum Prepayment. It may be the amount received as a bonus, increment, an amount from investment matured, or maybe a sum received as a gift.

Here is a link to the Lumpsum prepayment calculator.

This calculator will help you know the impact of prepayment, i.e. the amount you would be saving on interest and the months by which your tenure has reduced. We will find how this calculator works with the help of an example.

Example: You take a loan for Rs. 20 lacs, for a tenure of 20 years @ 9% interest.

Workings in the calculator: Just enter the below details, in the calculator.

  • The loan amount,
  • The loan tenure, and
  • The rate of interest.

monthly emi

Now if you plan to prepay Rs. 3 lacs in the 24th month.
Just enter them.

  • The month in which you are going to prepay and
  • The amount you wish to prepay.

lumpsum pre payment

Entering the above details in the lumpsum prepayment calculator you will automatically get

  • The actual interest payable.
  • The interest to be payable after the lumpsum prepayment.
  • The total interest saved with lumpsum prepayment and
  • The no. of months decreased by lumpsum prepayment.

interest payable

Here, in this case, the actual interest to be payable was Rs. 23,18,685, after the lumpsum prepayment, it becomes Rs. 14,44,997 and the amount you have saved on interest is Rs. 8,73,688 and the loan tenure also decrease by 65 months. This is how lumpsum prepayment works.

Now we will see the workings of Lumpsum EMI from Sheet 2 of the lumpsum prepayment calculator.

(In relation to the above example) We will see what happens when you prepay Rs.3 lacs as a lump sum in the 24th month. Look to the below table, when you prepay, your interest payable and the outstanding loan amount decreases drastically.

lumpsum pre payment work

This is how Lumpsum Prepayment works.

You can download the lumpsum prepayment calculator here.

Now we will see what is Top-up EMI.

2. What is Top-up EMI Prepayment?

First, let’s see what EMI is.EMI stands for Equated Monthly Installment. Itis the
amount to be paid every month. Increasing your EMI’s on a yearly basis, at a certain percentage is called Top-up EMI Prepayment.

Say, for example, increasing the EMI amount by 5% every year… It can be done with an annual increment. This is a simple, easy and very practical way to prepay your house loan.

Here is a link to the Top-up EMI Prepayment calculator.

We will find how this calculator works with the help of an example.

Example: You take a loan for Rs. 20 lacs, for a tenure of 20 years @ 9% interest.

Just enter the below details in the Top-up EMI Prepayment calculator.

  • The loan amount,
  • The loan tenure, and
  • The rate of interest.

monthly emi

Now enter in the Top-up EMI Prepayment calculator,

  • The month in which you are going to top up the EMI and
  • The percentage you would like to increase on EMI every year.

increase your EMI every year

Entering the above details you would automatically get

  • The actual interest that is payable.
  • The interest to be payable with Top-up EMI.
  • The total interest saved with Top-up EMI.
  • And the no. of months decreased by Top-up EMI.

payable with topup the EMI

The actual interest to be payable was Rs. 23,18,685 and it becomes Rs. 15,24,372, after topup EMI payment and the amount you have saved on interest, is Rs. 7,94,313 and the loan tenure also decreases by 89 months.

This is how Top-up EMI works.

Now we will see the workings from sheet 2 of the Top-up EMI Prepayment Calculator. (In relation to the above example)

Look at the below table, to find what happens when you increase EMI by 5% from the 20th year. Your interest payable and outstanding loan amount decreases gradually.
interest payable and outstanding loan amount

This is how Top-up EMI Prepayment of housing loan works.

You can download the Top-up EMI Prepayment calculator here.

In both the prepayments, there is definitely an amount you would be saving on interest and also a reduction in the loan tenure. So, it is definitely beneficial.

Now we will see a few commonly asked questions.

Should You invest or make Home Loan Prepayment?

To know this find the maximum returns you will get per annum with an investment. Also, find how much you will be able to save per annum if you prepay in part or full. Find which is more profitable, the prepayment, or the investment, then choose accordingly.

Example: You have 3 lakhs of idle funds, you can use it for either prepayment or investment, but before that, compare the amount you receive from the investment and amount saved on home loan prepayment. Say you get Rs. 3,15,000 from the investment and you are saving Rs.4,20,000 from the home loan prepayment.

Which would you choose?

You would opt for the home loan prepayment. Likewise, you should check which is beneficial for you and opt for that which is beneficial.

Also read, “A Basic Checklist: 5 Key Aspects to Check in Any Investment Before You Invest”

Should you reduce the home loan’s tenure or the EMI?

Reducing home loan tenure instead of EMI will help reduce the total interest outflow. It is always advisable to increase the EMI amount as and when the salary increases. This will help you prepay your loan faster and would help you save on interest and also reduce your home loan tenure.

If you instead reduce your EMI, you will have to pay a lot more on interest, and the loan tenure also increases. Hence it’s beneficial to reduce your home loan tenure, not your EMI.

Don’t you think reducing your home loan tenure is more beneficial?

Conclusion

From this article, you would have got a better understanding of home loan prepayment. There are a lot of benefits to prepaying your home loans, but it’s also good to know the disadvantages before prepaying your home loan. Make a wise choice, considering all the above factors.

If you have any comments or questions, write them in the comment box below.

Or are you interested in creating a Comprehensive Financial Plan for your financial goals?

Skip the queue by registering for your 30 Minute FREE Financial Plan Consultation. Click the ‘‘BOOK YOUR SLOT NOW!’’ button below. 

Reader Interactions

Previous article: Have You Lost Your Job Because of the Corona Crisis? Discover How to Invest to Get a Regular Income for Two Years
Next article: What Every Home Loan Taker Should Know About Home Loan Balance Transfer to Make the Best Use of It

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Client Login

Recent Posts

  • Unwrapping Mutual Funds: A Beginner’s Guide
  • LIC Bima Shree Review – Good or Bad Investment Option?
  • LIC New Money Back Policy 25-year Plan – Plan 921 Review: Good or Bad?
  • Tata Technologies IPO Review – Should You Invest?
  • LIC Jeevan Tarun Review – Good or Bad Investment Option?
Lingesh MMG
Lingesh MMG
20. September, 2023.
Na eppo tha financial goal la enna therunju kitta..enaku full support panna thuku thank you..🥰 friendly nalla pesuninga...
Ravi L
Ravi L
15. August, 2023.
Very knowledgeable and professional team, guided me with the precise financial solutions and timely suggestions.
Hardik Dave
Hardik Dave
5. July, 2023.
Holistic Investment is really nice and trust worthy financial planner. They plan things in realistic manner and also consider future dimensions of items also. They are always available for small or big queries, and also share knowledge and help you become more financial literate, and take right decisions in all financial matters.
Dr. Padmakar Wagh
Dr. Padmakar Wagh
27. June, 2023.
Mr Ramalingam who is the Director of Holistic investments has a excellent financial planning knowledge, the entire Holistic team has been very helpful in my financial planning journey and execution. This is my third year of financial planning with Holistic investments and so far I am satisfied with the progress I have made.
Binamra Dash
Binamra Dash
13. June, 2023.
Very knowledgeable team. Guided me properly with my concerns.
Murugan Bala
Murugan Bala
16. May, 2023.
I have been investing through Holistic for the past 4 years and my experience with them have been really good. The team of Rajan and Ramalingam doing excellent services in meeting my needs through proper guidance on investment options customized. Theya re always available on any specific needs time to time.I would recommend their services to my friends and colleagues too.
Neeraja R K
Neeraja R K
15. May, 2023.
Working with holistic investment planners was a really wonderful experience for me. For me the entire team had been very supportive in all ways. Their working strategy is well planned and methodical. They always keep me informed and updated about my investments, so that i can take informed decisions. The team first helps us understand the basics of investments, then they collect data, work with the data and then provide investments solutions according to our goals which i find it the best. Good luck to the entire team.
deepika kulkarni
deepika kulkarni
21. April, 2023.
We have availed holistic service from last couple of years and are very happy with our decision. Their systematic approach has helped us plan our finances and meet our goals. They provide very comprehensive and detail plan and resource management every 6 months which ensures we are on right track to achieve our goals. Rajan and Ramalingam from holistic are always there to help us with our queries. They have also accommodated any changes to our goals or resources mid year in a professional manner.
Ashook Panneerselvam
Ashook Panneerselvam
21. March, 2023.
For the past year, I have been interacting with Holistic Investment. I frequently read Nanayam Vikatan, which is a publication owned by the Vikatan family, and I was impressed by their financial advice. My brother also suggested holistic investing, and he also got excellent financial advice. Holistic Investment follows a methodical approach that I really liked because they first fully understand our financial situation "As Is," which includes "Assets" and "Liabilities," as well as our short-, mid-, and long-term goals, on the basis of which they provide a detailed plan on how to achieve our goals for which they are recommending various investment options. Even in the investment advice, why do they suggest particular mutual funds and what is the justification behind it, which adds transparency to the client. One essential factor is that they are always available. Even if I needed to make some urgent financial decisions, they were very helpful and kind to answer my questions via phone calls, WhatsApp messages, and emails. I was very happy with their service. Periodic reviews are also crucial, even though I have forgotten that they occur once every three months, and I also intend to renew this year.
Mahesh S
Mahesh S
19. February, 2023.
I have availed Holistic investment service for last 1yr against my early retirement decision. they provided me comprehensive detailed report how to move ahead with my existing resources. moreover, they are available to me whenever i have any doubt.. highly recommend others to avail their service
Google rating score: 4.5 of 5,
based on 104 reviews

Google Reviews

Lingesh MMG
Lingesh MMG
20. September, 2023.
Na eppo tha financial goal la enna therunju kitta..enaku full support panna thuku thank you..🥰 friendly nalla pesuninga...
Ravi L
Ravi L
15. August, 2023.
Very knowledgeable and professional team, guided me with the precise financial solutions and timely suggestions.
Hardik Dave
Hardik Dave
5. July, 2023.
Holistic Investment is really nice and trust worthy financial planner. They plan things in realistic manner and also consider future dimensions of items also. They are always available for small or big queries, and also share knowledge and help you become more financial literate, and take right decisions in all financial matters.
Dr. Padmakar Wagh
Dr. Padmakar Wagh
27. June, 2023.
Mr Ramalingam who is the Director of Holistic investments has a excellent financial planning knowledge, the entire Holistic team has been very helpful in my financial planning journey and execution. This is my third year of financial planning with Holistic investments and so far I am satisfied with the progress I have made.
Binamra Dash
Binamra Dash
13. June, 2023.
Very knowledgeable team. Guided me properly with my concerns.
Murugan Bala
Murugan Bala
16. May, 2023.
I have been investing through Holistic for the past 4 years and my experience with them have been really good. The team of Rajan and Ramalingam doing excellent services in meeting my needs through proper guidance on investment options customized. Theya re always available on any specific needs time to time.I would recommend their services to my friends and colleagues too.
Neeraja R K
Neeraja R K
15. May, 2023.
Working with holistic investment planners was a really wonderful experience for me. For me the entire team had been very supportive in all ways. Their working strategy is well planned and methodical. They always keep me informed and updated about my investments, so that i can take informed decisions. The team first helps us understand the basics of investments, then they collect data, work with the data and then provide investments solutions according to our goals which i find it the best. Good luck to the entire team.
deepika kulkarni
deepika kulkarni
21. April, 2023.
We have availed holistic service from last couple of years and are very happy with our decision. Their systematic approach has helped us plan our finances and meet our goals. They provide very comprehensive and detail plan and resource management every 6 months which ensures we are on right track to achieve our goals. Rajan and Ramalingam from holistic are always there to help us with our queries. They have also accommodated any changes to our goals or resources mid year in a professional manner.
Ashook Panneerselvam
Ashook Panneerselvam
21. March, 2023.
For the past year, I have been interacting with Holistic Investment. I frequently read Nanayam Vikatan, which is a publication owned by the Vikatan family, and I was impressed by their financial advice. My brother also suggested holistic investing, and he also got excellent financial advice. Holistic Investment follows a methodical approach that I really liked because they first fully understand our financial situation "As Is," which includes "Assets" and "Liabilities," as well as our short-, mid-, and long-term goals, on the basis of which they provide a detailed plan on how to achieve our goals for which they are recommending various investment options. Even in the investment advice, why do they suggest particular mutual funds and what is the justification behind it, which adds transparency to the client. One essential factor is that they are always available. Even if I needed to make some urgent financial decisions, they were very helpful and kind to answer my questions via phone calls, WhatsApp messages, and emails. I was very happy with their service. Periodic reviews are also crucial, even though I have forgotten that they occur once every three months, and I also intend to renew this year.
Mahesh S
Mahesh S
19. February, 2023.
I have availed Holistic investment service for last 1yr against my early retirement decision. they provided me comprehensive detailed report how to move ahead with my existing resources. moreover, they are available to me whenever i have any doubt.. highly recommend others to avail their service
Google rating score: 4.5 of 5,
based on 104 reviews

Footer

  • Articles
  • Gallery
  • Ideal Client
  • Jobs(Full Time)
  • Podcast
  • Services
  • Testimonials

Connect With Us

Holisticinvestment.in
10/15, Second Cross Street,
Seethammal Extn.,
Teynampet,
Chennai – 600 018,
INDIA.

Copyright © 2022. Holisticinvestment.in | All rights reserved.    Cared with ❤ by T-Square Cloud 1

×