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.
Let us first understand which options an individual has to opt for and their impact on the home loan repayment schedule.
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.
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.
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!!
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!!
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DEAR SIR
JAB MENE HOME LOAN LIYA THA TAB INTREST 8.85 THA AB 7.85 HAY OR MENE 14 EMI BHARI HE TO ASI EXEL SHEET CHAIYE
CALL ME 9714827222
"Home Loan EMI Calculator
(www.basunivesh.com)"
"Instructions -
# Fill the data only in light green cells."
Loan Information Balance after a specified year
Loan Amount ? 15,50,000 Balance after (Yrs) 5
Interest Rate 8.85% Date 05-09-2029
Term Length (in Years) 20 Interest Paid ? 6,50,093
First Payment Date 05-10-2024 Principal Paid ? 1,77,702
Compound Period Monthly Outstanding Balance ? 13,72,298
Payment Frequency Monthly [42]
Monthly Payment ? 13,797 Totals Assuming Prepayment
Years Until Paid Off 20
Prepayment Number of Payments 240
Start at Prepayment No 1 Last Payment Date 05-09-2044
Prepayment Amount ? 5,000 Total Payments ? 33,11,180
Prepayment Interval 1 Total Interest ? 17,61,180
Additional Annual Prepayment ? 1,00,000
Total Prepayments ? - Totals Assuming No Prepayment
Interest Saved ? 0 Total Payments ? 33,11,180
Total Interest ? 17,61,180
Periods Per Year 12
Loan Tenure 20
Periods Per Year 12
Payment Schedule (With Prepayments)
No. Payment Date Year Interest Rate Interest Due Payment Due Extra Payments Additional Payment (Irregular Payment) Principal Paid Balance
0 ? 15,50,000
1 05-10-2024 8.85% ? 11,431 ? 13,797 ? - ? 2,365 ? 15,47,635
2 05-11-2024 8.85% ? 11,414 ? 13,797 ? - ? 2,383 ? 15,45,252
3 05-12-2024 8.85% ? 11,396 ? 13,797 ? - ? 2,400 ? 15,42,852
4 05-01-2025 8.85% ? 11,379 ? 13,797 ? - ? 2,418 ? 15,40,434
5 05-02-2025 8.85% ? 11,361 ? 13,797 ? - ? 2,436 ? 15,37,998
6 05-03-2025 8.85% ? 11,343 ? 13,797 ? - ? 2,454 ? 15,35,544
7 05-04-2025 8.85% ? 11,325 ? 13,797 ? - ? 2,472 ? 15,33,072
8 05-05-2025 8.85% ? 11,306 ? 13,797 ? - ? 2,490 ? 15,30,582
9 05-06-2025 8.85% ? 11,288 ? 13,797 ? - ? 2,509 ? 15,28,073
10 05-07-2025 8.85% ? 11,270 ? 13,797 ? - ? 2,527 ? 15,25,546
11 05-08-2025 8.85% ? 11,251 ? 13,797 ? - ? 2,546 ? 15,23,001
12 05-09-2025 1 8.85% ? 11,232 ? 13,797 ? - ? 2,564 ? 15,20,436
13 05-10-2025 8.85% ? 11,213 ? 13,797 ? - ? 2,583 ? 15,17,853
14 05-11-2025 8.85% ? 11,194 ? 13,797 ? - ? 2,602 ? 15,15,250
Dear Vishal,
Can you elaborate in simple way of what actually you are looking for?
hello the excel is good but i have a question, i past 3 years home rates hav changes many times starting from 6.5% to 9% nd now at 8.65% so how would we get actual EMis paid also suppose a tenure at 6.5% is 29 years and when it changed to 9% it would have increase to 40 or more years approx so those all things should be thte in calculation to see actual calculations, pleas help preparing the same
Dear Arihant,
In such frequent changes, no option but to update the rates manually.
Hello Basu Ji,
I have been using your excel since the last year and want to express that your excel has motivated me to prepay the loan. The amount saved in interest due to prepayment is humongous. Thank you for preparing the same
I have a question now that the ROI has changed how can i see its effect in the same fashion.
Because if i am changing the interest rate after the 1st year all the interest below is getting changed but then all the calculations are going haywire / the tenure also gets reset to the original tenure as i have also prepaid some amount.
Is there any other excel maybe that you have prepared
Dear Shashi,
I don't have such an excel. But let me prepare it. Regarding your prepay of loan, I am delighted that this excel helped you a lot.
Thank you Basu Ji for your reply
I would be glad if you could prepare the excel and send me a link to download the same
Dear Shashi,
Sure.
Hello Basu Ji,
Any update over the updated excel?
I understand i am trying to bother you with this to make my loan status more accurate. But banks are not able to do it for me.
Hence i am looking for your support
Dear Shashi,
Sorry for making you to wait. I will work on this as early as possible.
Hello Basu Ji,
I hope you were able to modify the excel.
If yes, could you please share it with me.
Dear Shashi,
Will do it shortly.
This is much needed for managing load. Request you to share updated sheet if possible.
Hello Mr. BasuNivesh, Can you also customize and include option of changed ROI in between the loan tenure. EMI amount remaining same, ROI either reduced / increased.
Dear Anand,
You can alter the itnerest manually. It is not a big deal.
Thanks Mr. Basavaraj & Team for your detailed knowledge sharing with examples. This really helped me deciding and prioritizing the financials.
Dear Siddesh,
My pleasure :)
It's excellent ?
Dear Basu, Thanks for this discussion thread and analysis ! this certainly helps. One thought thats bogling my mind, escpecially given the fact that in a home loan during the initial days major % of amount is paid towards interest and very less amount towards principal. This means despite you prepay your loan or add more amount towards your EMI, you have already effectively paid some portion of the interest for the money that you have prepaid. Of course this beings down your EMI, but effectively, for me, i dont think this is a wise opinion. But i would like to discuss with experts like you to understand what is the wisest way to proceed. IMO, dont prepay, if you have accumulated soem oney by saving, invest it into something that gives you decent return, even a FD is better because, if you prepay the loan, its a loss as you have already paid the interest for the money that you havent enjoyed completly. Thats the logic by which banks make money in housing loans. Thumb rule IMO, donot preclose loan, if you really want to close it, then ealiest the best, but still dont, go for FD.
Dear Shrinivas,
Assume that your home loan interest is 9% and then you must look for opportunities where the interest earning capacity is more than 9% and that too guaranteed. Then only it is wise. If there is no guaranteed arbitrage opportunity, then you are risking your money. Don't listen to Mutual Fund industry who plant so many rosy pictures.
Can you provide construction plan linked EMI calculator sheet?
Dear Vinay,
It needs to be customized. But let me prepare.
I K.Sateesh Completed 3years EMI's. my offered loan is 32lakhs and present out standing is 3000000 and earlier EMI is 9.4% after switch over my ROI is 8.7%. This is very useful Template
Please give any additional suggestions
Dear Komma,
What is your confusion?
Brilliant Calculator. Very useful indeed. Thank you for sharing it