How to Prepay a Home Loan

The Home Loan part-prepayment process involves paying off a substantial amount from your repayment amount, exceeding the usual EMI amount. Home Loan prepayment helps a borrower save the interest that is paid to the lender and develop a good credit profile for future borrowing instances.

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

• Part-prepayments
• Foreclosure, or complete prepayment

In this article, we explore both options that are available to borrowers, what they entail and their implications.

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 1 to 3 Equated Monthly Instalments (EMIs) as partial prepayment – however, this depends on the lender and their policies.

Complete Prepayment

A complete prepayment, or loan foreclosure is when the borrower repays the balance repayment amount in full with no more dues against their name. This helps you close your loan account before the end of the tenor and possibly save on the interest outflow.

All borrowers are advised to consult with their lenders to understand if there are any fees or charges attached to their prepayment or foreclosure process. Borrowers should note that no part-prepayment and foreclosure charges apply for individual borrowers who have availed of housing loans at floating interest rates.

Here is how you initiate a foreclosure request with your lender. Please note that this information isn’t pertaining to any one lender in specific.

1. Inform your lender of your intent to prepay or foreclose your Home Loan.

2. Ensure that your paperwork is in order. You will require your loan agreements, repayment statements, etc.

3. Get an NOC on the closure of your Home Loan.

Following the successful foreclosure, you can also apply for an encumbrance certificate.

*Terms and conditions apply.