@pawello I am so sorry but the way you are looking at this is completely wrong. The simple maths is as long as your opportunity cost of capital is more than your interest rate you should take the longest tenure of loan and never prepay.
Ex. If your saved up money is earning 10-15% cagr which is petty realistic with mfs than paying even 9% interest on loan is fine. By prepaying you are losing on the diff.
Not to disparage your theory, which makes sense, but this figure is taking an optimistic look at equity investing. I'm more inclined to pay off my debts should I lose my earning capacity due to the uncertain job/business market. I'm not even comparing the two options; just highlighting how many do not pay heed to what's going on in one's hefty loans.
@hetherington As far as I know, if the part payment amount is greater than 3 months EMI, then it’ll be automatically reduced from the principal (that’s what the HDFC guys told me 4 years back). Else it’ll reduce the tenure.
@substatica Try home loan emi prepayment calculator from emicalculator.net
You will understand how it works. The interest is calculated monthly on the remaining of the principal amount, which is, let's say, 2 lakhs towards the wnd of your loan, and emi is 20000. Means you pay approx 40000 interest and 2 lakhs principal. These numbers are random examples. Use the calculator to understand properly.