When you commit yourself to a long-term home loan, then many start to feel to repay the home loan at the earliest. Sharing with you prepay home loan calculator which can be downloaded at free.

One of the longest borrowing commitments is a home mortgage. Of course, individuals look for ways to prepay it as soon as possible. Thus, allow me to share with you the numerous choices for prepaying your mortgage as well as an excel spreadsheet to determine the overall impact.

## Prepay Home Loan Calculator – Download Free Excel Sheet

Let us first understand which options an individual has to opt for and their impact on the home loan repayment schedule.

### # Regular repayment

In this case, let us take an example you have opted for Rs.50 lakh of a home loan. The tenure is 25 years. If we consider the rate of interest at 8.5%, then the monthly EMI will be Rs.40,261.

If you are paying this EMI for the next 25 years, then you will pay a total of Rs.70,78,409 as an INTEREST during the whole loan tenure. If we consider the principal of Rs.50 lakh also, then in total you are paying Rs.1,20,78,409.

This is a normal procedure many follow and can be applied to those who don’t want to commit either regularly or once in a while to prepay the home loan.

What if we alter the tenure here?

10-Yrs Loan Tenure – EMI Rs.61,993 and the total interest payable is Rs.24,39,142.

15-Yrs Loan Tenure – EMI Rs.49,237 and the total interest payable is Rs.38,62,656.

20-Yrs Loan Tenure – EMI Rs.43,391 and the total interest payable is Rs.54,13,879.

25-Yrs Loan Tenure – EMI Rs.40,261 and the total interest payable is Rs.70,78,409

Hence, you noticed that if the loan tenure is long-term, even though the monthly EMI will reduce but in the end, you will pay more interest to the lender.

### # Prepay an additional equal amount along with regular EMI

Let us take an example of 25 years loan, Rs.50,00,000 loan amount with 8.5% as interest. We noticed above that the EMI will be Rs.40,261.

a) What if we pay an additional Rs.5,000 (around 10% of EMI) throughout the whole tenure along with the regular EMI of Rs.40,261?

The loan will be over by around 18 years rather than the original 25 years!!

The total interest payable in this case will be Rs.47,82,338 rather than the original total interest of Rs.70,78,409. Savings of around Rs.22,96,071!!

b) If you pay Rs.10,000 additional amount along with regular EMI, then the loan will be over by around 14 years. The total interest payable will be Rs.36,84,545 instead of the original total interest of Rs.70.78,409. Savings of around Rs.33,93,865!!

c) If you pay Rs.20,000 additional amount along with regular EMI, then the loan will be over by around 11 years. The total interest payable will be Rs.25,64,751 instead of the original total interest of Rs.70.78,409. Savings of around Rs.45,13,658!!

This seems to be an effortless way. As your income increases on yearly basis (the minimum of around 5%), then considering this effortless way will actually reduce your home loan burden in a big way.

### # Prepaying once a year

Many even though their salary increases on yearly basis, find it difficult to increase their loan repayment mainly because they feel their expenses also increase in the same ratio. Hence, for few, the loan repayment option is only whenever they get a lump sum as a yearly bonus from the employer. In such a scenario, what will be the impact on your home loan repayment?

a) If you prepay Rs.1,00,000 a year from the beginning of loan tenure, then you will end up in paying the total interest of Rs.38,61,811. The loan tenure will end in around 15 years rather than the earlier 25 years. The savings in interest is Rs.32,16,598!!

b) If you prepay Rs.2,00,000 a year from the beginning of loan tenure, then you will end up in paying the total interest of Rs.27,00,323. The loan tenure will end in around 11 years rather than the earlier 25 years. The savings in interest is Rs.43,78,087!!

b) If you prepay Rs.3,00,000 a year from the beginning of the loan tenure, then you will end up paying the total interest of Rs.20,73,178. The loan tenure will end in around 9 years rather than the earlier 25 years. The savings in interest is Rs.50,05,231!!

### # Prepay an additional equal amount along with regular EMI + Prepaying once a year

In this option, you pay an additional amount along with regular EMI and also once a year you repay the lump sum.

a) Let us assume you are repaying regular Rs.5,000 additionally along with regular EMI and also once a year prepaying Rs.1 lakh as a lump sum, then the loan will finish in 13 years instead of the earlier 25 years. The total interest payable is Rs.32,99,543. The total interest saving is Rs.37,78,866!!

b) Let us assume you are repaying regular Rs.5,000 additionally along with regular EMI and also once a year prepaying Rs.2 lakh as a lump sum, then the loan will finish in 11 years instead of the earlier 25 years. The total interest payable is Rs.25,65,721. The total interest saving is Rs.45,12,688!!

c) Let us assume you are repaying regular Rs.5,000 additionally along with regular EMI and also once a year prepaying Rs.3 lakh as a lump sum, then the loan will finish in 9 years instead of the earlier 25 years. The total interest payable is Rs.21,20,931. The total interest saving is Rs.49,57,479!!

You noticed from all of the above available options that prepaying an additional equal amount along with the EMI and once-a-year lump sum seems to be a far better option.

However, to execute such an option, you have to be ready to sacrifice your certain monthly income and also yearly income. This can be possible only if you have a consistent commitment and a zeal to repay the home loan at the earliest.

Caution – Many salaried continue the home loan with the intention that there is a tax benefit in retaining a home loan. It is a complete MYTH.

Let us take an example Mr.A is having a home loan and yearly he is paying Rs.1.5 lakh as interest to the banker. Mr.B does not have a home loan. Let us take an example Mr.B investing in PPF yearly Rs.1.5 lakh. Let us assume that both are under the 30% tax slab.

In Mr.A’s case, just to save the tax of Rs.45,000, he is DONATING Rs.1,05,000 to the banker in the form of interest.

However, in Mr. B’s case, he is saving Rs.45,000 and also creating a wealth of Rs.1,50,000 by investing in PPF.

You can play with all these options using the below shared Prepay Home Loan Calculator.

A loan in any form is always not good. Living a debt-free life is far more important than living in a debt especially just to save the tax.

I am not saying that one must not opt for a home loan. However, my point is that don’t retain a home loan for the sake of tax saving.

There may be another thought process that is mainly propagated by financial experts to invest somewhere else (especially in equity) rather than repaying it eagerly. However, do remember that all these are sellers in one way or another way. They show some fancy returns of the past (cherry-picking the time horizon) and lure you to assume that if it happened in the past, then it MUST happen in the future also. It MAY or MAY NOT.

In the end, wealth creation is nothing but having a calm and decent sleep rather than worrying about our debt.

However, the choice is YOUR’S!!

## 5 Responses

Very Useful

Good Calculator. But I think loan interest calculated based on Simple Interest not on Compound interest. And Indian Banks calculate Interest rate based on Compound Interest calculation.

Dear Sanjay,

Loans are always on compounding but not on simple interest.

Awesome calculator Nivesh!

Dear Amol,

My pleasure.