What is Home Loan Repayment?
Home Loan repayment, also known as Home Loan foreclosure, is when a borrower repays the full outstanding loan amount in a single payment instead of opting for EMIs. It is part of the Home Loan process wherein the borrower can pay off the loan before the expiry of the tenure. Usually, the repayment tenure of a Home Loan expands up to 32 years in the form of small, manageable EMIs as per the amortization schedule of the lender. For first-time borrowers wondering what home repayment is, what are the different types, and how to repay the amount, here are all the details.
Different Home Loan Repayment Options Explained
While financial institutions and banks determine the housing loan repayment schedule in most cases, the borrower can make certain changes as per convenience and financial needs. For example – one may either choose to pay the EMI in small installments throughout the length of the tenure or pay a higher instalment to pay off the entire amount way before the expiry of the loan tenure. Borrowers can pick from the following Home Loan repayment methods.
Step-Up Repayment
For this type of repayment option, the EMI amount increases as the tenure extends. In other words, the borrower pays a lesser EMI during the initial years of loan repayment and a larger EMI as the tenure progresses. This type of repayment option is best suited for freshers or newbies if they do not have enough funds to pay off the EMIs during the start of their careers.
Step-Down Repayment
Contradictory to the previous one, the Step-down repayment option involves an eventual decrease in the housing loan EMI with the extension of the tenure. This is suitable for borrowers nearing retirement age since paying off a higher EMI can be easier when one has a steady source of income.
EMI Holiday
Some lenders offer an exclusive EMI holiday at the beginning of the repayment schedule to delay the EMI deduction from the bank account by a couple of months following the loan disbursal.
Lump-Sum Repayment
This is a great option for borrowers planning to settle the loan amount immediately. In the case of a housing loan, the total amount can be disbursed in instalments, in such cases, the borrower only pays the interest on the loan amount, also known as pre-EMIs, till the disbursal of the final instalment. The EMIs, which comprise both interest and the principal amount, are payable following the complete disbursal of the housing loan. The lump-sum payment can be done after the full disbursement of the loan amount.
Balloon Repayment
This option works along the same lines as the lump sum repayment, but the borrower has to make a larger payment as the last instalment. The tenure is usually taken for a shorter period.
Prepayment
Prepayment is a good option for those who have surplus funds in hand and are willing to repay the amount completely or partially. However, some lenders may charge a penalty for housing loan prepayments. Note: Individual borrowers with a floating interest rate on Home Loans do not have to pay any extra charges for prepayment or foreclosure. However, this may change for individual and non-individual borrowers who have availed of loans for business expenses.
*Terms and conditions apply.
Understanding Your Home Loan Repayment Schedule
Your Home Loan repayment schedule, also known as amortisation schedule, outlines how your EMIs are split between interest and principal over the loan tenure. In the initial years, a larger portion of your EMI goes towards interest payment, while the principal component gradually increases over time.
To easily view this breakdown, you can use our Home Loan EMI Calculator. It helps you estimate your monthly instalment and provides a detailed repayment schedule to give you a clear picture of how you will repay your loan month-wise.
How to Calculate Your EMIs and Assess Your Repayment Schedule?
To calculate your EMIs and view your amortisation schedule, you can use an EMI calculator. To give you a clearer idea of what a repayment plan might look like, with the assumption that the interest rate on a Home Loan is 7.45%* p.a., we have provided calculations below. Please note that these calculations are only indicative, and actuals will depend on numerous things, including your tenure, and loan amount.
| Loan Amount | Tenure | EMI Amount |
|---|---|---|
| Rs.10 Lakh | 32 years | Rs.7,588 |
| Rs.10 Lakh | 20 years | Rs.8,678 |
| Rs.10 Lakh | 10 years | Rs.12,398 |
Frequently Asked Questions
The Home Loan repayment schedule is the EMI payment plan that is given to borrows by the lender. The schedule details the payment plan down to each month, till the end maturity of the loan.
The foreclosure month is the month in which you a borrower repays the full Home Loan amount.
You can choose from various repayment options:
- Step-Up Repayment – EMIs start lower and increase over time
- Step-Down Repayment – EMIs begin higher and reduce later
- EMI Holiday – You get a few months’ grace after disbursal before EMI payments begin
- Lump-Sum (Pre-EMI) Repayment – You pay only the interest until full loan disbursal; principal repayment starts later
- Balloon Repayment – EMIs remain low during the tenure, with a large final payment at the end
- Prepayment – You can repay a lump sum amount over and above your regular EMIs
Your Home Loan EMI is calculated based on your loan amount, tenure, and interest rate.
Yes, individual borrowers with floating interest-rate Home Loans can make part-prepayments or foreclose their loans without any extra charges. However, this may vary for non-individuals and individuals who have availed of loans to meet business expenses.
Missing a Home Loan EMI can lead to late payment charges. Also, it can affect your credit score negatively.
