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How to Prepay a Home Loan _WC

The Home Loan part-prepayment process involves paying off the remaining loan amount and the interest accrued on the loan till the date of repayment. Home Loan prepayment helps a borrower save the interest that must be paid to the lender and develop a good credit profile for future borrowing instances.

The Home Loan prepayment usually includes foreclosure charges apart from the remaining principal amount and the interest till date. Generally, foreclosure charges may range form 2-5%, depending on the lender. However, Bajaj Housing Finance doesn’t charge any foreclosure or part pre-payment charges.

There are two kinds of prepayments that are accepted by lending institutions.

Partial Prepayment

Partial prepayments only pay off a part of the  Home Loan and not the entire loan amount. It is not unusual for lending institutions to accept amounts equivalent to 3 Equated Monthly Instalments (EMIs) as partial prepayment. However, the borrower is free to increase the amount paid as prepayment if they so desire. Many advise borrowers to make a partial prepayment whenever they have a cash surplus, so they can reduce their EMI load, and can save more on their Home Loan.

Complete Prepayment

A complete prepayment leads to the transfer of the said property in the name(s) of the borrower(s) and relieves the borrower(s) from any financial or legal liability vis-à-vis the Home Loan, before the end of their official repayment tenor.

Home Loan Part-Prepayment Calculator

The Home Loan prepayment rules vary from lender to lender, as a result the borrower should understand in detail the rules for foreclosure of the Home Loan. To make it easier for the borrower, Online Home Loan Prepayment Calculators are easily available and help in calculating the total cost payable. The variables of the loan, such as the amount borrowed, the total number of EMIs (both paid and unpaid), rate of interest, and the tenor can be entered into the Home Loan part-prepayment calculator  to help understand the repayment schedule better. These calculations are better done through the calculator to avoid mistake or confusion.

To begin with the Home Loan prepayment process, the borrower needs to request the lender for a written estimate of foreclosure costs. This is followed by the submission of the loan documents to the lending institution. Home Loan documents include the loan agreement, the no dues and no-objection certificates (NOC/NDC) and the payment receipt of the last EMI payment made. This is followed by the actual payment which is made to repay the loan.

After the payment is made the lending institution should immediately provide a receipt of the payment. And after processing the foreclosure paperwork, the lending institution should provide the borrower with a loan closure certificate, a final receipt of the amount paid, and no financial or legal liability certificate. These documents should be retained by the borrower to prove that he/she has paid off the Home Loan entirely.

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