Most banks allow you to repay both part and full prepayment of a home loan. You are also allowed to pay a certain portion of the outstanding balance and go with the same EMI afterward. However, many banks charge early repayment penalties of up to 2-3% of the principal amount outstanding.
Prepayment penalty may vary according to the reasons and source of funds. In case of prepayments are made through non-borrowed funds (borrower’s own funds), then no prepayment penalty or low prepayment is levied on the borrower. However, if the prepayment is made through a loan from another bank, in such cases the charges are usually higher than when you pay from your own sources.
Normally, floating interest rate home loans taken by borrowers are exempted from prepayment charges. You may credit more than your EMI amount into your loan account periodically and bring down your interest burden as and when funds are available with you. Most banks do not charge a pre-payment penalty if you deposit more than your EMI payable periodically.
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