Repaying your home loan? Learn in depth if it is wise to prepay your home loan | Business Upturn

Repaying your home loan? Learn in depth if it is wise to prepay your home loan

Prepaying home loans can help homeowners save money and become debt-free faster, but it depends on individual circumstances

Not only is owning a home a lifelong goal, but it’s also one of the biggest financial commitments anyone makes. Many homeowners fantasise about paying off their mortgages earlier and escaping the chains of debt.

One fantastic way to do this is to make principal prepayments on your mortgage, according to Jetaish Gupta, co-founder and director of Adore Group.


When you decide to make regular monthly payments on your mortgage, a sizable chunk of the initial installments goes towards interest and a smaller portion towards principle. As the loan term lengthens, this dynamic changes, with a greater portion of each installment going towards the principle. However, by making additional payments, you can expedite your payback process and significantly reduce the overall interest paid.

The interest component is larger at the beginning of the home loan term and gradually decreases with time. “By paying in advance, the principal amount is decreased, which results in less accurate interest computations in following months. According to Amit Gupta, MD, SAG Infotech, this method minimises interest payments and speeds up loan repayment.

Prepayment is free for loans with fluctuating rates, however prepayment fees may apply for loans with fixed rates. According to Gupta, this strategy, which separates EMIs into lower interest and bigger principal components, facilitates lower interest rates and faster principal payback.

Think about how much easier it would be to not have to worry about home payments for a very long time. According to Subhash Goel, Director of Goel Ganga Developments, the shorter loan period will give the homeowner not just financial freedom but also peace of mind, allowing them to completely focus on other important life goals.

The possibility of debt relief and EMI-free months is quite alluring, but its practicality depends on each person’s unique situation. Before using emergency cash, it is important to carefully consider funding sources, bonuses, and reserves.

The Reserve Bank of India (RBI) has released comprehensive guidelines for the resetting of floating interest rates on personal loans with Equated Monthly Instalments (EMI) as the repayment schedule. Any rise in the EMI/tenure or both as a result of this must be immediately disclosed to the borrower.