How the Comparison Works
A. Prepay: the lump sum and the monthly extra go into the loan, keeping the EMI the same so the loan closes early. Once it closes, the EMI plus the extra are invested every month until the original end date.
B. Invest: the loan runs as usual and the lump sum and monthly extra are invested from day one.
Both end on the same date with no loan, so the larger post-tax investment pot wins. Roughly, investing wins when your post-tax return is reliably above the loan rate. Prepaying is a guaranteed “return” equal to the loan rate, with no market risk.
- Keep an emergency fund before prepaying, since money put into a loan is hard to get back.
- Floating-rate home loans to individuals generally have no prepayment penalty; check your loan terms.
- Old regime borrowers may lose some home loan tax deductions by prepaying.
See your new tenure with the EMI & Prepayment Calculator, or read the loan prepayment guide.