Home Loan EMI Calculator: Repaying a 20-year home loan 5 years early can save you ₹12 lakh—here’s how..

Home Loan EMI Calculator: Most people take out a home loan to buy a house. While this is a convenient option—since saving up the entire lump-sum amount required to purchase a home is difficult—it also brings the responsibility of paying EMIs for many years. If you have taken a home loan for a 20-year tenure, is it possible to pay it off five years early?

The answer is yes. To do this, you would need to pay a slightly higher EMI each month. The benefit is that you could save lakhs of rupees in interest costs.

Let’s assume you have taken a home loan of ₹40 lakh at an annual interest rate of 8.5% with a 20-year repayment tenure. Now, let’s see how much money you could save if you were to repay this same loan in 15 years instead.

Full breakdown of a ₹40 lakh home loan

Suppose the bank has granted you a loan of ₹40 lakh at an annual interest rate of 8.5%. If you repay it over 20 years, your monthly EMI would be approximately ₹34,713. Over the 20-year period, you would pay the bank a total of about ₹83.31 lakh. This amount comprises the ₹40 lakh principal and approximately ₹43.31 lakh in interest.

Now, if you reduce the loan tenure from 20 years to 15 years, your EMI would increase to approximately ₹39,390. This means you would need to pay about ₹4,677 more each month. However, this would allow you to clear the loan five years earlier and reduce the total interest payable to approximately ₹30.90 lakh.

How much would you save by repaying the loan five years early?

Parameter    20-Year Loan    15-Year Loan
Loan Amount    ₹40 Lakh    ₹40 Lakh
Annual Interest Rate    8.50%    8.50%
Loan Tenure    20 Years    15 Years
Monthly EMI    ₹34,713    ₹39,390
Total Repayment    ₹83.31 Lakh    ₹70.90 Lakh
Total Interest    ₹43.31 Lakh    ₹30.90 Lakh

Based on this, if you pay an additional EMI of approximately ₹4,677 per month, the loan can be paid off 5 years earlier. This would result in an interest saving of about ₹12.41 lakh. In other words, by shouldering the burden of a slightly higher EMI, you can save a significant amount in the long run.

Another way to repay your home loan faster

If you do not wish to increase your EMI, you can periodically repay a portion of the loan's principal amount. This is known as prepayment. For instance, if you receive extra funds—such as a bonus, a salary increment, or money from another source—you can use a part of it to pay off the home loan.

This reduces the outstanding principal amount of the loan. Consequently, the interest charged subsequently may also decrease. If the bank offers the choice, opting to reduce the loan tenure rather than lowering the EMI after a prepayment can be more effective in saving on interest costs.

Disclaimer: This content has been sourced and edited from Money Control. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.