Any form of loan is a debt one normally wants to pay off as soon as possible (ideally in advance or before it is due). Prepayment is a feature that enables you to pay back your mortgage loan (in full or in part) before the end of the loan term. Customers typically choose prepayment when they have more money.
A mortgage, however, should not be viewed as a personal loan, auto loan, etc.
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HDFC Home loan prepayment: Pointers to keep in mind
There are several ways to pre-close a home loan. You can pay the full amount at once or only a portion of it. Everything is based on the amount of money you have on hand. Before beginning the prepayment, some things to keep in mind are:
- Analyse your cash requirements for short-term, medium-term, and long-term demands. Do not jeopardise your emergency fund to pay off your mortgage.
- Additionally, determine whether investing in MFs is more advantageous than foregoing interest payments or foreclosure.
- Pay off other high-cost debts earlier.
- Your savings on an HDFC home loan interest rate will be greater if your mortgage is still in its early stages.
- Home loans with fixed interest rates come with a prepayment penalty.
You may easily prepay HDFC home loan online by using the customer portal.
Benefits of HDFC home loan prepayment
Prepaying your home loan can offer significant financial advantages, enhancing your overall financial health. Here’s how:
Reduction in interest burden
Home loans are structured so that the interest component of your Equated Monthly Installments (EMIs) is higher during the initial years of the loan tenure. You directly reduce the principal amount outstanding by making prepayments, especially early in the loan term. This reduction in principal leads to a decrease in the total interest payable over the life of the loan, resulting in substantial savings.
Shortening of loan tenure
When you prepay a portion of your loan, you can either reduce your EMI amount or maintain the same EMI and shorten the loan tenure. Opting to keep the EMIs unchanged while reducing the tenure can lead to faster loan closure, allowing you to become debt-free sooner.
Enhanced financial freedom
Eliminating debt obligations ahead of schedule provides greater financial flexibility. The funds that would have been allocated to future EMIs can be redirected towards other financial goals, such as investments, savings, or personal expenditures. This increased liquidity can improve your ability to manage unforeseen expenses and contribute to long-term wealth accumulation.
Lock in period for HDFC home loan prepayment
For HDFC home loans, you have a lock-in period of six months for online prepayments. This means you can only make online prepayments after successfully completing six EMIs. If you wish to make a prepayment before this period, you must visit an HDFC Home Loan branch in person.
Branch Visit Requirements for Early Prepayment
To prepay before completing the sixth EMI, visit your nearest HDFC branch and bring the following documents:
- Aadhar Card for identification
- Bank statement for the last three months
- Cheque for the prepayment amount
After the six-month lock-in period, you can conveniently make prepayments online through the HDFC portal.
How to do prepayment of HDFC home loan
There are two ways to prepay your HDFC home loan:
Part prepayment
Partially prepaying your debt is an option when funds are available or at regular intervals. Prepaying the extra amount over and above your EMI will lower the loan’s principal and your interest payments. After making a prepaid or partial payment, you have two options for your subsequent EMIs:
- You can lower your monthly EMI payment while maintaining the same loan term.
- Reduce the loan duration while keeping the EMI amount the same.
How to make part prepayment of HDFC home loan online
To make the part payment of HDFC home loan online you will have to contact the customer support via call or email and request them for part prepayment of home loan. The customer support will share with you a unique payment link that you can use to make part prepayment of HDFC home loan online.
Foreclosure
When you choose to pay out your home loan and all associated interest to the bank in full at once, you are choosing to go through with a foreclosure. There can be some fees associated with prepayment. Each bank has a different set of fees.
How to prepay a jointly-held HDFC home loan?
If your HDFC home loan is held jointly by two or more applicants, you may still prepay the loan either partially or fully. However, there are some important procedural steps to ensure the prepayment is valid and processed smoothly:
Who can initiate the prepayment?
- Primary applicant can usually initiate the prepayment from their registered email or contact number.
- However, if the loan is jointly held, HDFC may require a No Objection/Consent Email or Declaration from the co-applicant depending on the prepayment amount and mode of payment.
What to do in case of joint holders?
- When submitting your prepayment request via email, mention that the loan is jointly held.
- Include both applicants’ names and state that the co-applicant has no objection to the prepayment.
- You may attach a joint declaration or email from the co-applicant’s registered email ID confirming their consent.
Preclosing HDFC home loan: Online procedure
Keep your bank notified of your choice to prepay or foreclose the mortgage, first and foremost. Even if you intend to make partial payments, you must let the bank know since they will adjust the tenure and the payment schedule as necessary. The associated insurance for your house is decreased when you pay back your mortgage. As a result, the insurance matures at final closure. There is no reimbursement for the premium.
How to make HDFC home loan prepayment online?
HDFC does not provide a direct option to make home loan prepayments online. Instead, you’ll need to request access by contacting the bank. Follow these steps to proceed with an online prepayment:
Compose an Email Request: Send an email from your registered email ID to both customer.service@hdfc.com and customer.request@hdfc.com. You can use the following sample format:
Subject: Request Form – Part Prepayment
Dear Sir/Madam,
Request Form – Part Prepayment
Loan Account No.: [Your Loan Account No.]
Loan Type: Residential premises loan with loan Application (File No: [Specify File No])
We have availed a loan under the above-mentioned loan account no. and would like to make a Part prepayment of Rs. [Amount in words, Amount in figures].
The above has been availed under the adjustable Rate, non-residential premises loan.
I am aware that any prepayment will be permitted by HDFC subject to prepayment charges if applicable to that product and scheme.
We confirm the prepayment is being made from:
Name as per Bank Account: [Your Bank Account Name]
Bank Account No.: [Your Bank Account No.]
Bank Name: [Your Bank Name]
Branch: [Your Bank Branch]
We are attaching herewith 3 months bank statement of the mentioned account to enable you to verify the source of this prepayment.
We would like to make this part prepayment on (date) or as early as possible as per your terms and conditions and would request you to inform us of the amount payable by me including prepayment charges if applicable.
We further undertake that HDFC reserves the right to revise the amount payable if at any time it is found that the sources and documents submitted is/are found to be incorrect and/or inadequate.
From:
Address: [Your Address]
Mobile No.: [Your Mobile No.]
Email: [Your Email]
Please find as above complete details for processing of part pre-payment as the subjected matter. Also, please inform us in advance if any prepayment charges are applicable to this prepayment.
The Bank statement of the mentioned account is attached herewith for your reference.
Regards,
[Your Name]
Await Response: After sending the email, HDFC will either call you for confirmation or send a message to your registered mobile number. You will receive a follow-up email with a link to make the prepayment online.
Complete Payment: Click on the provided link, log in to your loan account, and make the prepayment as directed.
This process allows you to make part prepayments without visiting the bank branch in person, provided you have completed at least six EMIs.
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Foreclosure process for HDFC home loans online
Make a list of all the paperwork you gave the bank when you applied for the loan whenever you are ready for the foreclosure. Once the debt is repaid, this enables them to access all information from their records. A possible list of documents might be as follows:
- Possession letter
- Sale Deed of the property
- Builder Buyer Agreement
- Conveyance Deed
- Tripartite Agreement
The bank will determine the total amount owed, including any applicable interest and penalties. Next, send the money via a demand draft or a check. The bank will send you an acknowledgement letter after the whole sum has been paid off to them. It will take a few days for the bank to send you the paperwork, so the NOC (No Objection Certificate) and the No Dues certificate will come after.
After the loan is paid, the bank will provide you with all of your original property documents and certify that you are the legal owner of the property and that it is no longer subject to amortisation. Checking the update on your CIBIL data is important. At least 40 days will pass before it appears in your report. Additionally, make sure you carefully save the bank paperwork that serves as evidence of loan repayment. You can use the same in the event of a disagreement at a later time.
HDFC home loan prepayment online: How to make partial payments?
Online HDFC home loan partial prepayment is possible. You must submit an online payment using internet banking or do what you normally do for EMIs. However, be careful to review the loan account statement next month and obtain confirmation of the same. Your loan tenure or EMI will vary due to the prepayment. You must visit the bank branch and notify the bank if you wish to cancel the account.
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Part Prepayment vs foreclosure
When managing your HDFC home loan, you have two primary options to reduce your debt ahead of schedule: part prepayment and foreclosure. Each approach has its advantages and considerations. Here’s a concise comparison to help you decide which strategy aligns best with your financial goals:
| Aspect | Part prepayment | Foreclosure |
| Definition | Making a lump-sum payment towards your loan principal, in addition to regular EMIs, without closing the loan account. | Repaying the entire outstanding loan amount in one go, leading to the closure of the loan account before the scheduled tenure. |
| Impact on loan tenure | You can reduce the loan tenure if you keep EMIs constant; alternatively, you can lower EMIs if you opt to maintain the original tenure. | Eliminates the remaining loan tenure, as the loan is fully repaid. |
| Interest savings | Reduces the total interest payable over the loan’s duration, with more significant savings when done early in the tenure. | Maximises interest savings by stopping future interest accruals entirely. |
| Liquidity consideration | Allows retention of some liquidity, as only a portion of the loan is prepaid, enabling flexibility for other financial needs or investments. | Requires a substantial lump-sum payment, which may affect your liquidity and limit funds available for emergencies or alternative investments. |
| Prepayment charges | For individual borrowers with floating-rate loans, HDFC does not levy prepayment charges. However, for fixed-rate loans or non-individual borrowers, charges may apply. | Similar to part prepayment, there are no charges for individual borrowers with floating-rate loans. Fixed-rate loans or non-individual borrowers may incur foreclosure charges. |
| Tax implications | Continued eligibility for tax deductions on interest (under Section 24) and principal repayments (under Section 80C) for the remaining loan tenure. | This may lead to loss of future tax benefits, as the loan is closed and no further interest or principal repayments occur. |
Key considerations:
- Financial goals: If your objective is to reduce the loan burden while maintaining financial flexibility, part prepayment might be more suitable. Conversely, if becoming debt-free is a priority and you have sufficient funds, foreclosure could be advantageous.
- Timing: Both strategies yield more substantial interest savings when executed earlier in the loan tenure due to the higher interest component in initial EMIs.
- Penalty charges: Review your loan agreement or consult with HDFC to understand any applicable prepayment or foreclosure penalties, especially for fixed-rate loans.
Prepayment/ foreclosure fees for floating rate loans with HDFC home loans
- If an individual borrower chooses to prepay or foreclose on their HDFC house loan, there are no fees associated with either action.
- The following rules will apply to borrowers who are not individuals (i.e., businesses, sole proprietorship firms or HUFs acting as co-applicants).
- Within the first six months of the loan, there will be a two per cent prepayment penalty for prepaying an HDFC home loan. There will also be applicable taxes, statutory levies, and charges.
- Up to 25% of the initial principal loan amount may be prepaid without incurring any fees after the first six months and for a maximum of 36 months. Prepayment fees of 2% will apply to any prepaid amount that exceeds 25% in any given fiscal year.
- After the first 36 months, there are no fees associated with early loan payback.
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Tax implications of prepayment or foreclosure
While prepaying your HDFC home loan can save you substantial interest and provide financial relief, it’s important to consider how it affects your tax benefits under Sections 24(b) and 80C of the Income Tax Act.
Loss of tax benefits after full prepayment (foreclosure)
- Under Section 24(b), you can claim a deduction of up to ₹2 lakh per year on interest paid for a self-occupied property.
- Under Section 80C, you can claim a deduction of up to ₹1.5 lakh on principal repayments (as part of your EMI).
- Once you foreclose the loan, these deductions are no longer available for the remaining financial years—since there are no EMIs or interest outflows.
- If you foreclose early in the year, your total tax deduction for that year may reduce significantly.
Impact on partial prepayment
- If you only part-prepay the loan, your annual EMI amount may reduce, which in turn may lower the total principal and interest paid in the year—potentially reducing your deductible limits under both sections.
Ideal timing to prepay
To maximize tax benefits:
- If planning to foreclose, consider doing so after March (end of the financial year), so you still claim full deductions for that year.
- If part-prepaying, do it early in the financial year (April–June) to maximize annual interest savings while retaining deductions for the full year.
Note: If you’re in the higher tax bracket and relying on deductions, time your prepayments strategically. Always consult a tax advisor before large repayments.
HDFC home loan prepayment charges
Prepayment/foreclosure fees for fixed and combination rate loans with HDFC home loans
- For individual borrowers, for balance transfer or refinancing, 2% of the amount being prepaid in addition to the applicable taxes and other statutory charges will be levied.
- For companies, sole proprietorship, partnership, or HUF:
- If the home loan is being prepaid in the first 6 months, then 2% of the amount being prepaid in addition to the applicable taxes and other statutory charges will be levied.
- If the home loan is being prepaid after six months but up to 36 months, then:
- No charges will be levied up to 25% of the opening principal amount each financial year.
- 2% charges will be levied if the prepaid amount grosses 25% of the opening principal amount each financial year.
- If the home loan is being prepaid after 36 months, no charges will be levied.
What RBI guidelines say about prepayment charges?
The Reserve Bank of India (RBI) has established clear directives concerning prepayment and foreclosure charges on floating-rate loans:
- No prepayment penalties for individuals: Banks and Non-Banking Financial Companies (NBFCs) are prohibited from imposing prepayment or foreclosure charges on floating-rate term loans sanctioned to individual borrowers for non-business purposes
- Applicability to co-borrowers: This exemption extends to loans with co-borrowers, ensuring that joint borrowers also benefit from the waiver of such charges.
- No minimum lock-in period: Lenders cannot stipulate a minimum lock-in period for prepayment or foreclosure of floating-rate loans, allowing borrowers flexibility to repay their loans ahead of schedule without incurring penalties.
Transparency in loan agreements: All terms related to prepayment and foreclosure charges must be transparently disclosed in the loan agreement, ensuring borrowers are fully informed.
Smart home loan prepayment strategies for maximum savings
Prepaying your home loan can significantly reduce your interest burden and shorten the loan tenure. Financial experts suggest the following strategies to optimize your prepayment plan:
- Start early: Making prepayments during the initial years of your loan is most effective, as a larger portion of your EMI goes towards interest during this period. Early prepayments can substantially decrease the total interest paid over the loan’s lifespan.
- Bi-weekly payments: Instead of monthly payments, consider making half of your EMI every two weeks. This approach results in 26 half-payments annually, equating to 13 full payments, thereby reducing the principal faster and saving on interest.
- Utilize windfalls: Allocate unexpected funds like bonuses, tax refunds, or gifts towards your loan principal. Such lump-sum payments can significantly lower your outstanding balance and the interest accrued.
- Round-up payments: Rounding up your EMI to the nearest higher amount (e.g., from ₹19,500 to ₹20,000) can lead to additional principal repayment without substantially impacting your monthly budget.
- Prioritise high-interest debts: Before prepaying your home loan, ensure that higher-interest debts, such as credit card balances, are cleared. This strategy optimises your overall financial health by reducing costly interest obligations.
- Maintain an emergency fund: Ensure sufficient liquid assets to cover unforeseen expenses before allocating surplus funds to loan prepayment. This precaution prevents financial strain in emergencies.
- Assess investment alternatives: Compare the interest savings from loan prepayment with potential investment returns. If certain investments offer higher returns than the interest rate on your loan, it might be more beneficial to invest surplus funds instead.
- Monitor prepayment penalties: Review your loan agreement for any prepayment penalties, especially for fixed-rate loans. Understanding these charges ensures that your prepayment strategy is cost-effective.
Housing.com POV
HDFC home loan prepayment allows borrowers to reduce their debt burden ahead of schedule. Whether you opt for part prepayment or foreclosure, it’s crucial to consider factors such as your cash flow needs and the loan’s remaining tenure. Prepayment can significantly reduce interest payments, especially if made early in the loan term. Additionally, HDFC makes the process convenient, allowing online prepayments after a six-month lock-in period. However, consider any prepayment penalties, particularly for fixed-rate loans or non-individual borrowers. Planning wisely can help you maximize savings while efficiently managing your loan.
FAQs
Can I prepay my HDFC home loan online?
Yes, you can prepay your HDFC home loan online after completing six EMIs. You'll need to contact HDFC's customer service via email or phone to request a unique payment link for part prepayment.
Is there a penalty for prepaying an HDFC home loan?
For individual borrowers with floating interest rate loans, there is no prepayment penalty. However, fixed-rate loans or loans taken by non-individuals may incur a 2% prepayment charge within the first 36 months.
What is the lock-in period for HDFC home loan prepayment?
There is a six-month lock-in period for online prepayments. During this time, you must visit an HDFC branch if you wish to prepay.
What documents are needed to prepay my HDFC home loan at a branch?
To prepay at a branch, you will need your Aadhaar card, a recent bank statement (last 3 months), and a cheque for the prepayment amount.
How does part prepayment affect my EMI or loan tenure?
When you make a part prepayment, you can either reduce your EMI while keeping the loan tenure the same, or shorten the loan tenure while keeping the EMI amount the same.
