Are you planning to pay off your HDFC Bank home loan ahead of schedule? If so, you may be wondering how prepaying your loan affects your finances. With the help of the HDFC Bank Home Loan Prepayment Calculator, you can easily estimate the impact of extra payments on your loan.
HDFC Bank Home Loan Prepayment Charges
Depending on the property ownership and the type of loan interest rate (floating or fixed), HDFC Bank charges different prepayment fees and GST may apply.
For Floating Interest Rates
- No prepayment charges apply for loans sanctioned solely to individual borrowers.
- Prepayments (partial or full) can be made through any source without penalty.
For Fixed Interest Rates
- Prepayment Charge: 2% of the prepaid amount.
- Applicable on: All loans prepaid through refinance from any Bank/HFC/NBFC/Financial Institution.
- Inclusions: All amounts prepaid during a financial year.
- Exemption: No charges if prepayment is made from own sources.
- Scope: Applies to both partial and full prepayments.
HDFC Home Loan Pre Payment Rules
- Prepayment lock-in period: 6 months from the date of loan disbursement.
- Online prepayment is allowed only after completion of 6 EMIs.
- To make a prepayment before 6 EMIs, you must visit an HDFC Home Loan branch in person.
- This rule applies specifically to HDFC home loans.
Who is Eligibile to Make HDFC Bank Home Loan Prepayment?
If you’re a HDFC Bank home loan borrower, here’s what you need to know about eligibility for prepayment:
- The primary borrower of the HDFC Bank home loan is eligible to make the prepayment.
- In case of a joint home loan, co-applicants can also make the prepayment, provided the loan is in their name as well.
- Your account should be free of defaults or overdue payments. Prepayment is typically allowed only if your repayment track record is consistent.
- Some lenders require borrowers to complete a minimum number of EMIs (e.g., 6–12 months) before allowing prepayment. Check your loan agreement for specific terms.
How Does HDFC Bank Home Loan Prepayment Calculator Work?
To calculate the impact of prepayment on your home loan, the formula involves adjusting the remaining principal and recalculating either the loan tenure or the EMI. The formula is:
Remaining Principal = (Remaining Principal – Prepayment Amount) × (1 + i/n)^(n × t)
Where:
- Remaining Principal: The remaining loan amount after accounting for the prepayment.
- Prepayment Amount: The extra payment made towards the loan over and above the regular EMI.
- i: The annual interest rate on the home loan.
- n: The number of times the interest is compounded per year (usually 12 for monthly compounding).
- t: The remaining term of the loan in years.
Home Loan Prepayment Case Study
Mr. Ram, a resident of Mumbai, took a home loan from HDFC Bank to purchase a property. He opted for a loan amount of ₹50,00,000 at an interest rate of 9.75% p.a., with a loan tenure of 30 years.
His monthly EMI was ₹42,958. Over the years, Mr. Ram diligently paid his monthly installments. After 15 years of repayment, he decided to make a prepayment of ₹5,00,000 to reduce his loan burden and save on interest payments. Below is an analysis of how this prepayment impacted his loan status.
| Category | Details |
|---|---|
| Loan Amount | ₹50,00,000 |
| Rate of Interest | 9.75% p.a. |
| Tenure | 30 years |
| EMI | ₹42,958 |
| Total Interest to be Paid in 30 Years | ₹1,04,64,779 |
| Total Amount to be Paid in 30 years | ₹ 1,54,64,779 |
Prepayment Details
Mr. Ram decides to make a prepayment of ₹5,00,000 at the 15-year mark. Let’s analyze the impact of this prepayment.
| Prepayment Amount | ₹5,00,000 |
|---|---|
| New Principal After Prepayment | ₹41,69,068 – ₹5,00,000 = ₹36,69,068 |
Loan Status at Year 15
At the 15-year mark, Mr. Ram has already made 180 EMIs and has 180 EMIs remaining. Here’s the status of the loan at that point:
| Category | Amount |
|---|---|
| Opening Balance (Year 15) | ₹41,69,068 |
| EMIs Paid | 180 months (15 years) |
| EMIs Remaining | 180 months |
| Interest Already Paid | ₹1,04,64,779 – Remaining Interest ≈ ₹36,08,226 |
Impact of Prepayment
Below is the detailed impact of the prepayment on Mr. Ram’s home loan:
| Category | Before Prepayment | After Prepayment | Savings |
|---|---|---|---|
| Remaining Principal | ₹41,69,068 | ₹36,69,068 | ₹5,00,000 |
| Remaining Tenure | 15 years (180 months) | 11.5 years (138 months) | 3.5 years (42 months) |
| Monthly EMI | ₹42,958 | ₹42,958 | – |
| Total Future Payments | ₹77,32,440 | ₹59,28,204 | ₹18,04,236 |
| Interest Component | ₹35,63,372 | ₹22,59,136 | ₹13,04,236 |
Financial Benefits:
- Reduction in Loan Tenure: The prepayment of ₹5,00,000 reduces Mr. Ram’s loan tenure by 3.5 years (from 15 years to 11.5 years).
- Interest Savings: Mr. Ram will save approximately ₹13,04,236 in interest payments.
- Total Cash Flow Savings: The total amount of money saved in future payments, including the reduction in principal and interest, is ₹18,04,236.
Suggested Read: HDFC Home Loan Customer Support
Documents Required for HDFC Bank Home Loan Prepayment
- Prepayment Request Form (duly filled and signed).
- Identity & Address Proof : PAN card, Aadhaar, passport, etc.
- Loan Account Details : Loan account number and original loan agreement.
- Payment Instrument : Cheque/DD/online payment proof for prepayment amount.
Suggested Read: HDFC Housing Finance Home Loan Statement Download
How to Make HDFC Bank Home Loan Prepayment Online?
- Send a Prepayment Request Email to HDFC Bank
Mention your loan account number, amount you wish to prepay, and your preference: to reduce EMI or to reduce tenure.
- Wait for a Confirmation Email
You will receive a response within 24–48 hours. This reply includes the prepayment request form and further instructions.
- Fill and Reply with the Prepayment Form
Complete the form with:
1. Loan and borrower details (loan type, fixed/floating rate)
2. Your bank account details (account number, bank name, branch)
3. Proposed prepayment date
4. Your full name, registered address, mobile number, and email ID (must match HDFC records)
5. Attach 3 months’ bank statements in the same email reply - Receive Final Email with Payment Link
After your email is acknowledged, HDFC will send a new email with:
Login link to the HDFC Home Loan portal
Instructions and precautions (e.g., disable pop-up blockers, use the same EMI-linked account, NRI-specific instructions) - Log in to HDFC Loan Portal
Enter your credentials
Navigate to the ‘Pay Online’ section (bottom-left corner of the screen)
Select your bank and proceed to make the payment via net banking - Post-Payment Processing
It can take up to 4 working days for the prepayment to reflect in your loan account.
Suggested Read: Home Loan Closure
How to Make HDFC Bank Home Loan Prepayment Offline?
| Step | Details |
|---|---|
| 1. Visit the Branch | Go to your nearest HDFC Ltd Home Loan branch. |
| 2. Collect the Form | Pick up the prepayment form available at the entrance. If not found, ask the security guard for assistance. |
| 3. Fill in the Form | Provide the following details: • Loan Account Number • Type of Loan (e.g., Home Loan) • Prepayment Amount • Prepayment Date |
| 4. Submit Documents | Attach: • Last 3 months’ bank statements (printed or emailed) • Source of funds (salary/investments) • Cheque details if applicable |
| 5. Submit to Staff | Submit the completed form and documents to the branch executive to initiate the prepayment process. |
Suggested Read: Impact on Home Loan Insurance During Home Loan Balance Transfer?
Why Does HDFC Bank Charge You on Making Home Loan Prepayment?
HDFC Bank, like other housing finance companies (HFCs), charges prepayment fees on home loans primarily for the following reasons:
| Reason | Explanation | Key Points |
|---|---|---|
| Compensation for Lost Interest | Lenders lose future interest income when loans are prepaid. | – Fee offsets financial loss from foregone interest. – Ensures recovery of anticipated revenue. |
| Administrative Costs | Prepayment involves documentation, verification, and record updates. | – Covers operational expenses. – Secondary reason compared to lost interest. |
| Regulatory Framework | HFCs (like PNB Housing) are regulated by NHB, not RBI. | – NHB permits prepayment fees forboth fixed and floating-rate loans. – RBI bans fees for banks’ floating-rate loans. – Borrowers must verify updated regulations. |
| Market Practices & Profit | Prepayment fees act as a revenue stream in competitive markets. | – HFCs may prioritize profitability. – Borrowers can negotiate terms or switch lenders. |
Suggested Read: Top 5 Banks for Home Loan Balance Transfer
When are Banks Not Allowed to Charge Prepayment Fees?
- Floating-Rate Home Loans (Individuals): RBI prohibits prepayment charges on floating-rate loans for individuals, allowing flexibility for partial and full prepayments.
- Government Scheme Loans: Loans under schemes like PMAY cannot have prepayment charges to promote affordable housing.
- Refinancing/Balance Transfer: Banks can’t charge prepayment fees when a loan is refinanced or transferred to another lender, except for standard processing fees.
Suggested Read: Toilet Directions as per Vastu
Things to Consider While Making HDFC Bank Home Loan Prepayment
- Loan Type: Check if you have a fixed or floating rate loan to determine if prepayment charges apply.
- Prepayment Charges: Fixed-rate loans may attract a 2% charge on the outstanding principal for loan transfer.
- Partial vs. Full Prepayment: Partial prepayment reduces EMI or tenure, full prepayment eliminates the loan entirely.
- Loan Tenure Impact: Prepayment can shorten your tenure or reduce your EMI.
- Prepayment vs. Investing: Consider if investing the prepayment amount gives higher returns than saving on interest.
- Tax Implications: Prepayment may reduce home loan interest deductions under Sections 80C and 24(b).
- CIBIL Score Impact: Prepayment might temporarily affect your credit score.
- Emergency Fund: Ensure sufficient funds remain after prepayment for unforeseen expenses.
- Loan Agreement Terms: Review your agreement for any specific prepayment penalties or conditions.
- Long-Term Financial Goals: Align prepayment with your broader financial strategy and goals.
- EMI and Interest Reduction: Prepayment reduces both your EMI and total interest payable.
- Loan Balance: Ensure the prepayment amount is sufficient to meet your financial objectives.
Suggested Read: Can Home Loan Balance Transfer Backfire?
When is it the Right Time to Make Home Loan Prepayment?
- When interest rates on your loan exceed potential returns from investments (e.g., stock markets, FDs).
- After building an emergency fund (3–6 months of expenses) and clearing high-interest debts.
- When prepayment penalties are low or waived (e.g., RBI prohibits banks from charging fees on floating-rate home loans for individuals).
- To shorten loan tenure significantly (prioritize prepayment if reducing tenure aligns with financial goals like retirement).
- If tax benefits (e.g., Section 24 deductions) are no longer a priority (prepayment reduces interest, lowering tax savings).
Suggested Read: Mutual Funds vs. Rental Income
Home Loan Part Pre Payment vs. Full Pre Payment
Here’s a concise comparison of Home Loan Part Prepayment vs. Home Loan Full Prepayment in a tabular format:
| Criteria | Part Prepayment | Full Prepayment |
|---|---|---|
| Definition | Paying a portion of the outstanding loan amount before tenure ends. | Paying the entireremaining loan balance to close the loan immediately. |
| Impact on Loan | Reduces tenure(if EMI unchanged) or lowers EMI(if tenure unchanged). | Loan is closed permanently; no further EMIs or interest. |
| Key Benefit | Saves interest over the loan term; retains liquidity for other needs. | Eliminates debt entirely; improves cash flow post-closure. |
| Processing Fees | Lower or nil fees (varies by lender). May have annual prepayment limits. | Higher fees (e.g., 1–3% of outstanding amount). Some lenders waive fees. |
| Tax Implications | Tax benefits on interest (if applicable) continue for the reduced tenure. | Tax benefits (e.g., Section 24/80C in India) cease post-closure. |
| Eligibility | Allowed multiple times (subject to lender terms). No lock-in period in most cases. | One-time closure. Requires sufficient funds to settle the entire balance. |
| Example | Loan: ₹50L @ 8% for 20 years. Part-prepay ₹10L → Tenure reduces to ~15 years. | Loan: ₹50L outstanding. Full prepayment closes the loan, saving ₹XXL in future intere |
Suggested Read: Can You Pay Rent to Your Parents and Claim HRA?
Advantages and Disadvantages of Home Loan Prepayment
| Aspect | Advantages | Disadvantages |
|---|---|---|
| Interest Savings | Reduces overall interest paid over the loan tenure. | May not be ideal if the prepayment does not significantly reduce interest. |
| Loan Tenure | Shortens the loan tenure, allowing you to repay the loan faster. | Could lead to a higher monthly EMI if the loan tenure is reduced. |
| Financial Freedom | Provides peace of mind and reduces debt burden. | Might strain finances if the prepayment amount is large. |
| Credit Score Improvement | Can boost credit score by reducing outstanding debt. | Prepayment might temporarily lower liquidity. |
| Flexibility in Loan Terms | Offers the option to re-adjust loan tenure or EMI based on new principal. | Could incur prepayment penalties, especially in fixed-rate loans. |
| Opportunity for Investment | Frees up funds for other investments once the loan is repaid earlier. | Potential opportunity loss if funds used for prepayment could have been invested elsewhere for better returns. |
Suggested Read: Cities for Profitable Airbnb Investment in India
Conclusion
Before considering prepayment, eliminate high-interest debts and secure an emergency fund. Prepaying your home loan can be beneficial if you aim to own your home sooner or decrease interest expenses.
If you’re considering a home loan balance transfer, trust Credit Dharma to find the perfect solution for you.
Frequently Asked Questions
Prepayment can lead to a reduction in the loan tenure and/or EMIs, depending on the option the borrower chooses. By reducing the principal amount, the interest component decreases, allowing for these adjustments.
Prepaying a home loan can reduce liquidity, incur opportunity costs from foregone investment returns, lead to prepayment penalties, potentially affect your credit score, decrease tax benefits, and reduce financial leverage, so it’s crucial to weigh these risks against the benefits.
Yes, you can make prepayments on your home loan every month, provided your lender allows frequent prepayments without penalties.
Deciding between prepayment or continuing with a home loan depends on your financial situation. Prepayment can save on interest costs but may deplete your cash reserves. Consider your financial goals and consult with a financial advisor to make an informed decision.
For floating rate home loans, most banks, including HDFC, do not charge a prepayment penalty. However, fixed-rate loans may incur charges, especially if the prepayment is significant.
HDFC Home Loan
SBI Home Loan
