Further EMI vs One-time Prepayment: Have Rs 60 lakh residence mortgage? Which possibility could assist you to save extra quantity and time?

Further EMI vs One-time Prepayment: Repaying a house mortgage can provide you and your loved ones peace of thoughts. It may improve your money influx, serving to you deal with different monetary targets. However when repaying your Rs 60 lakh residence mortgage, which reimbursement technique could save extra of your cash – paying one extra EMI yearly or making a one-time prepayment of an quantity equal to all extra EMIs? See comparisons between 2 situations. 

Mounted vs Floating Fee House Mortgage

House loans will be fastened or floating charge.

In a hard and fast charge mortgage, the equated month-to-month instalment (EMI) is fastened and does not change all through the mortgage tenure.

In a floating charge mortgage, similar to one linked to Exterior Benchmark Lending Fee (EBLR) or Marginal Value of Funds-Primarily based Lending Fee (MCLR), the EMI isn’t fastened and retains altering. 

Prepayment choices in fastened vs floating charge residence mortgage

In a hard and fast charge residence mortgage, there’s principally a lock-in interval for prepayment, which will be 1 to three years.

The lender might also have prepayment prices, plus a borrower must test with their lender for prepayment choices accessible. 

In a floating charge mortgage, there isn’t any lock-in interval and no prepayment or foreclosures prices as much as a mortgage of Rs 7.50 crore per borrower, as per Reserve Financial institution of India (RBI) directions given in February 2025.      

Prepayment choices

A house mortgage borrower can use the prepayment choices similar to repaying a share of the mortgage one time, foreclosing the mortgage after repaying the excellent mortgage, paying one extra EMI, or growing the EMI quantity yearly.

Such choices could range from lender to lender. A lender could use completely different parameters for purchasers primarily based on their credit score rating and reimbursement capability.

Calculations for story

Mortgage amount- Rs 60 lakh
Rate of interest- 9.5 per cent
Tenure- 25 years
Mortgage started- June 2025
Prepayment made- July 2028
Prepayment amount- Rs 9,43,596
Further EMI amount- Rs 52,422 
Further EMI begin date- July 2028

House mortgage breakup

Principal amount-Rs 60,00,000
House mortgage EMI- Rs 52,422
Whole interest- Rs 97,26,540
Whole amount- Rs 1,57,26,540

Situation 1 (Once you pay extra EMI)

Whole extra EMI paid- 18 
Whole quantity paid in extra EMIs- Rs 9,43,596
Estimated curiosity saved- Rs 20,38,464
Estimated time saved- 57 months

Situation 2 (whenever you make one prepayment of Rs 9,43,596)

We’re taking Rs 9,43,596 as the quantity since it’s also the entire quantity paid in 18 EMIs.
Once you make a prepayment, the lender provides you 2 choices – both scale back the EMI quantity or preserve it the identical.
Should you scale back the EMI quantity, you’ll save curiosity, however the mortgage tenure will stay the identical.
Nonetheless, for those who preserve the EMI the identical, not solely will you save closely on curiosity, however your mortgage tenure may also be lowered. 

Once you preserve EMI similar

Estimated curiosity saved- Rs 40,94,489
Estimated time saved- 96 months 

Once you scale back EMI quantity

Current EMI- Rs 52,422
Revised EMI- Rs 43,878
Quantity saved in EMI- Rs 8,544
Estimated curiosity saved on loan- Rs 13,03,502

(Disclaimer: This isn’t monetary recommendation. Do your personal due diligence or seek the advice of an knowledgeable for monetary planning.)