How much does prepaying a home loan save?

Lesson 12 of 28 · Your home loan, paid off sooner · 4 min read · Reviewed 15 Oct 2026

In the early years most of each EMI goes to interest. A prepayment goes straight to the principal, so every later EMI has less interest in it.

Banks can’t charge a penalty for prepaying a floating-rate home loan taken by an individual.

Key idea: Keep the EMI the same after a prepayment and the loan ends sooner. That saves more interest than lowering the EMI.

Try the calculator and the one-question quiz on this page to check your own numbers.

Common questions

Should I prepay or invest?

Compare your loan rate after any tax benefit with what you expect to earn after tax. Clearing a loan also lowers risk, which a return figure doesn’t show.

Is there a tax benefit on home loan interest?

In the old regime, up to ₹2 lakh of interest a year on a self-occupied home is deductible. The new regime doesn’t allow it for a self-occupied home.

When is the best time to prepay?

Earlier is better. A prepayment in year 3 saves far more interest than the same amount in year 15.

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