Payment of the home loan before the mortgage period is known as pre-closure of the home loan. You can opt for a home loan pre-closure for many reasons, such as getting lower interest owing to re-financing, etc. If a loan is pre-closed, the borrower may save a good amount of interest.
See also: 5 Ways to pay home loan faster
What is home loan pre-closure charges?
Money lending institutions, such as banks and NBFCs discourage homebuyers from paying the pre-closure charges as the loan would be re-paid faster, and interests earned will be impacted. To make up for this, some institutions charge the home loan pre-closure charges. So, one has to be careful while opting for pre-closure of loans. Sometimes, the charges levied for pre-closure would be more than money that you may save by pre-closing the loan. So, calculate everything before going for the pre-closure.
Home loan pre-closure charges
| Pre-closure charges | Prepayment charges | |
| Axis Bank | No | No |
| Andhra Bank | No | Â No |
| Bank of Baroda | No | No |
| Bank of Maharashtra | No | No |
| Bank of India | No | No |
| Canara Bank | No | No |
| Central Bank of India | No | No |
| DBS Bank | No | No |
| Dena Bank | No | No |
| Dhanlaxmi Bank | No | No |
| Federal Bank | No to 3% of the outstanding balance | No to 3% of the outstanding balance |
| IDBI Bank | No | No |
| Indian Overseas Bank | No | No |
| Jammu and Kashmir Bank | No | No |
| Karur Vysya Bank | No | Â No |
| Kotak Mahindra Bank | No | No |
| Oriental Bank of Commerce | No | No |
| State Bank of India | No | No |
| South Indian Bank | No | No |
| Tamilnad Mercantile Bank | No | No |
| Yes Bank | No | No |
| Aditya Birla Housing Finance Limited | No | No |
| AVAS Financiers Limited | No | No |
| Gruh Finance Limited | No | No |
| HDFC | No | No |
| IndiaBulls | No | No |
| Indian Shelter Finance Corporation | No | No |
| LIC Housing Finance Ltd. | No to 2% of the prepaid loan amount | No to 2% of the prepaid loan amount |
| PNB Housing Finance Ltd. | No | No |
| Reliance Home Finance Ltd. | 2-5% of the outstanding principal | 2-5% of the outstanding principal |
| Sundaram Home Finance Limited | No | No |
| Tata Capital | No charges if paid using own funds | No charges if paid using own funds |
Read also: What is ideal home loan tenure?
How will you pre-close the home loan?
- Submit a written application to the money lender that you want to pre-close the home loan and ask for the original property documents and home loan agreement papers.
- Settle all the outstanding dues.
- After pre-closure, get the NOC from the lender that will cite that no-pending dues exist, and your property can be legally released from mortgage.
- Get an NOC from the moneylender (bank or NBFCs), stating that all terms for pre-closure with respect to the repayment were followed.
- Get hold of your original property documents.
- Once the loan is closed, ask the moneylender to update your credit score. This will facilitate you getting easy loans.
What are the different types of home loan closure?
Regular closure: This means repaying the loan, according to the loan tenure agreed originally at the time of taking the home loan.
Pre-closure: This means paying the entire outstanding loan amount before the tenure finishes.
Bad loan closure: In case a borrower is unable to repay the loan, a bank may waive the fees sometimes. The bank seeks money from the guarantor and may look at attaching the collateral.
Settled loan closure: In case, the borrower is unable to repay the full loan amount, the moneylender may settle for a discounted rate to repay.
FAQs
Do we have pre-closure charges for home loans?
While generally there are no pre-closure charges for home loans, some institutions charge for pre-closure of home loans to discourage borrowers from closing the loan.
Is it a good idea to pre-close home loans?
Pre-closing home loans cannot help you become free from debt soon by saving on interest.
What is the minimum tenure for a home loan?
The minimum tenure for a home loan is 12 months.
What is the difference between prepayment and fore-closure?
While prepayment means you pay the EMI amount in advance and reduce the loan tenure, fore-closure means closing the entire loan before the tenure.
Does prepayment affect CIBIL scores?
No. CIBIL scores will not be affected by prepayment.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
