Home Loan Calculator: How prepayment can help one save Rs 34.77 lakh in interest on Rs 75 lakh, 25-year loan

Home Loan Calculator: Buying a home is a necessity for most people. But real estate is expensive. One needs a lot of money to purchase a home in one go. Even if one makes a decent down payment, they may still require a large amount to buy the home. So, the majority of people depend on a home loan to achieve the target.

But home loans are high in amount and have long duration.

As a result, the interest can be higher than the principal amount.

But the financial situation of a home loan borrower can change with time.

They may get a high-paying job, bonus in their job, a share in the property, or money from some other source.

That money can be used to reduce the home loan interest considerably. The interest amount can be reduced by paying an extra EMI every year, through increasing the down payment amount, or making a prepayment. In this write-up, we will give projections for how one can save Rs 34.77 lakh on a Rs 75 lakh, 30-year home loan.

Home loan conditions

We are taking the example of a Rs 75 lakh home loan for 25 years at the rate of 9.50 per cent interest rate. 

What will be EMI and interest on this loan?

The estimated EMI on this loan will be Rs 65,527, the estimated interest will be Rs 1,21,58,175, and the estimated repayment amount will be Rs 1,96,58,175.

How to reduce interest by Rs 34.77 lakh?

The borrower needs to make 3 prepayments of Rs 2.50 lakh each, which will be Rs 7.50 lakh in total (or 10 per cent of the principal amount).

When do they need to make prepayments?

The first prepayment will be made 3 years after the start of the loan. If the home loan is starting from October 2024, the first prepayment of Rs 2.50 lakh will be made in October 2027, the second of equal amount in October 2028, and the third of the same amount in October 2029.

What will be impact of it?

It will save estimated Rs 34,76,282 in interest, and the duration will be reduced from 300 months (25 years) to 236 months (64 months).

(Disclaimer: Our calculations are projections and are not investment advice. Do your own diligence or consult an advisor before taking home).