Home Loan

How Many Times Can Prepayment Be Done for Home Loan?


The idea of being in deep debt is repugnant to the vast majority of us. If you take out a loan, you probably want to pay it back as soon as possible, preferably before it’s due. But, a home loan is not the same as a credit card or an auto loan. Yet, there are perks to having a house loan that could outweigh prepayment costs.

Home loans have a prepayment option. This option allows you to pay back the principal amount any time before the end of the tenure. Prepayment is typically opted for by consumers who have financial flexibility. 

We’re sure you have many questions about home loan prepayments. 

In this article, we’ll talk about home loan prepayment and more:

How Many Times Can Prepayment for Home Loans Be Done?

Generally, you can prepay as many times as you want. But, this feature varies from bank to bank, and some banks only allow a certain prepayment limit. 

Should You Prepay Your Home Loan?

Based on your financial situation, prepaying your house loan may be a viable option. If you have an unexpected bonus or inheritance, you can use the money to pay off your home loan early. Banks or NBFCs do not assess prepayment penalties for floating-rate home loans.

There are situations where prepayment of a home loan might save you money. For example, when the loan amount or the interest rate charged by the lending institution is high. For example, suppose your interest rate is lower than average, and you’re eligible for deductions. In that case, you might want to keep the loan.

Who Is Eligible for a Prepayment for a Home Loan?

All borrowers are eligible for prepayment for home loans as long as their bank allows them. You may want to apply for a home loan that allows prepayment if you want to save money in the long run.

Banks often do not encourage prepayment. That’s because it is detrimental to their business. If you pay off a loan early, the bank will charge you more to process the assets through the credit system. So, you may have to pay a fee to the bank if you want to pre-close on your loan.

You have the right to foreclose on all or part of your loan if it provides you with a long-term profit. For example, if you save money on interest each month after paying the fine, it may be worthwhile to foreclose on the loan.

How Are Prepayment Charges Calculated?

Loans with a floating interest rate don’t need to pay prepayment fees, as per RBI standards. A prepayment is an option for such borrowers. That’s because they can make payments whenever they have money left over. 

Prepayment fees on fixed-rate home loans are usually rather low. However, when paying off a home loan early, you may be required to pay a fee equal to a tiny percentage of the principal balance.

How To Prepay a Home Loan?

Your home loan prepayment options are flexible. You can either pay off some of your debts or make a down payment on the home loan early. You can do either one or both simultaneously.

Start small and gradually increase your prepayments

Begin with a modest prepayment at the outset of the loan. And, gradually increasing it annually at a steady rate is one strategy for paying off a home loan early. To do this, just prepay some or all your annual expenses by saving aside money regularly.

Fixed advance payment

You can do this in several ways, one of which is to prepay your principal a set amount each year. Also to your EMI payments, you must do this. Then, budget your yearly expenses and put away a fixed amount regularly. Put this toward a prepayment of your home loan’s principal.

Increased EMI

Another strategy is to pay more than your calculated EMI. The monthly payment should be slightly greater than the home loan EMI. This will help a great deal in paying down your debt.

Full repayment

Paying off your debt early is an option. But, only if your financial condition has improved. Or, you have come into possession of a large chunk of money. But, you may incur costs if you prepay your home loan.

Benefits of Paying off a Home Loan Before Time

Clearing a home loan is referred to as prepayment in the finance world. You’ll be able to reduce your interest payments, as we mentioned before. Nonetheless, as you’ll discover later, there’s more to the story.

You can significantly reduce interest obligations

The typical length of a home loan is very long — around 20 years. Hence, the borrower’s interest could add up to a sizable sum. The interest paid can be significantly larger than the principal amount borrowed. That’s if your home loan interest rate exceeds the average market rate. Yet, if you can, you must prepay your home loan to reduce the total interest you’ll pay. If you need help comprehending, consider the following illustration.

Gives you the freedom to consider other scenarios

Your retirement fund will have greater room as the debt gets reduced. We tend to be very much in the here and now, with little thought given to the long term. Also, you might not have enough time to save for retirement if you let your home loan continue until you pay it off. 

Then, prepare to repay the debt sooner than you had originally anticipated. When you finally call it a career, you will no longer bring in any money. Moreover, retirement can be challenging if you haven’t saved enough money.

You can get more financing opportunities

You can often take on extra, smaller loans when you pay a home loan early. Fewer loan providers will work with you if you already have a home loan. Loan amounts tend to be bigger when borrowers have fewer or no current debt commitments.


You can save on interest by prepayment of your home loan. But, doing so by liquidating your investments or savings for emergencies can be risky. Don’t spend any surplus funds you have for house loan repayment. Instead, use them to invest in fixed-income products such as bonds or fixed deposits. You can also use funds that haven’t been designated for a certain expenditure.

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