I’m planning to take a home loan in the range of Rs. 70-80 Lakhs for a tenure of 10 Years. I’m most likely to make part payments atleast 3-4 times every year so i would like to know which bank would be best in terms making multiple part payment during the tenure of a housing loan. Also, when i make a part payment, would that amount be added to the principal immediately so that my interest to principal ratio in the EMI comes down for the next month’s payment.
Prepayment is possible in home loan and there is no penalty on this as used to happen earlier. Essentially, when you prepay your loan, no matter how small or big it is, this goes as part of the principal and hence your principal outstanding goes down. As principal goes down, your interest liability also goes down. This will be applicable immediately.
Almost all banks give prepayment facility now because it is a mandate by RBI. Hence if you are choosing your bank on this parameter, go for any bank.
However, if you want suggestion on which bank you should approach for home loan, I would suggest you do research on the total cost of loan which includes interest rate, processing fee, etc. Typically PSU banks charge lower interests than private banks.
There will no prepayment charges for your Home Loan if you opt for a floating rate Home Loan. This is as per Reserve Bank of India (RBI) directive and is applicable to Home Loans offered by any of the banks. There might be prepayment charges of up to 2% on the principal outstanding if you go for a fixed rate Home Loan. There are banks such as Dena Bank and Federal Bank that offer Fixed rate Home Loans with zero prepayment charges.
If you are looking for a Home Loan, click here.