My journey of prepaying home loan - 2020-2023

[substatica]

@natalijaasbj This is a really helpful website. Thanks for sharing!

 

[justinfaith22]

@pawello How much would you have made by investing all your prepayments in nifty index instead? That should be a comparison point.

 

[pawello]

@justinfaith22 I want to make that calculation on my case but it's a bit complex for me as I have to take TMV into consideration. Although, there are several such comparisons on imaginary cases online.

 

[shosho]

@pawello Whats the processing fees in the beginning when you took the loan and whats the foreclosure rates? And how does the foreclosure rate get calculated when the emis are accelerated? Also, you forgot to adjust the 44L with inflation. Just wanted to calculate the IRR that the bank earns after providing this credit to you.

I give out loans for a living but haven't taken one for myself so just wanted to understand the impact on foreclosure with accelerated emi's

 

[pawello]

@shosho I chose HDFC because I wanted nil foreclosure charges, and it delivered on that. The only caveats were that I shouldn't prepay in the first 6 months of the loan and the prepayment amount should be at least equal to the EMI.

But I had to pay a processing fee of 2,950 for the first rate reduction, then, 1,450, followed by 590, and so on, with 590 being constant in the last reductions.

Calculating the 44 lakh outgo and adjusting it for inflation is a tad difficult task, which was not important to me, so I didn't.

 

[shosho]

@pawello Could you calculate the banks irr for us?

 

[juls444]

@pawello Hey, thanks for the well written post. Could you share how you got the bank to apply the pre-payment against the principal and not future instalments? Pre-payment towards principal is obviously better for us as customers.

 

[pawello]

@juls444 You mention that while prepaying and ensure it gets added against the principal via your lender app/portal.

 

[mrdean36]

@pawello Whatever amount you prepaid just do a nifty purchase on that day and redo the same calculation

 

[hayley123]

@mrdean36 I really want know this, but I highly doubt OP is gonna do that.

 

[robbyreedy]

@pawello Hi, I've a home loan that I wanna prepay and get over with too. You said that you did some research about prepayments and interest rate reduction, can you share some of the materials or sites you looked into? That'd be really helpful.

 

[newman1992]

@robbyreedy I want to know where to check the banks running rate, the term in the post is "HDFC's running rate".
Thanks for the post OP

 

[pawello]

@newman1992 Check Mint or other publications to see what your lender's running rate is, and then walk into your lender branch and ask them. I did this every single time and it wasn't easy after the first couple attempts. I had to route in through my RM.