Can a bank charge me to foreclose?

Not on a floating-rate loan to an individual borrower in India. That is prohibited. Fixed-rate loans and loans to businesses can and usually do carry a charge.

Is closing early always worth it?

Financially, when the interest saved exceeds the charge, which it usually does. The counter-argument is what else the money could earn, and losing the interest deduction if you claim one.

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Loan Foreclosure Charges Calculator

What closing a loan early costs against what it saves. On a floating-rate loan to an individual, Indian regulation prohibits a foreclosure charge at all, which makes the comparison one-sided.

Also called: prepayment penalty calculator, loan closure charges.

Foreclosure charge

₹0

Closing now costs ₹0 in charges and saves ₹5,04,000 in future interest, a net gain of ₹5,04,000. This is a floating-rate loan, where a foreclosure charge to an individual borrower is prohibited, so the charge is zero.

Total to pay today

₹18,00,000

Interest saved

₹5,04,000

Net benefit

₹5,04,000

If you keep paying

₹23,04,000

On floating-rate loans

This is a floating-rate loan, where a foreclosure charge to an individual borrower is prohibited, so the charge is zero.

How this is calculated

Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for India change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

The charge is a stated percentage of the outstanding principal. The saving is every remaining EMI you avoid, less the principal you are paying off today, which is the future interest. The comparison is usually lopsided in favour of closing, and more so on floating-rate loans: the Reserve Bank prohibits foreclosure charges on floating-rate loans to individual borrowers, so the cost side is often zero. Fixed-rate loans and business borrowing are not covered by that prohibition.

the charge is a percentage of what is outstanding; the saving is every future rupee of EMI you no longer pay, less the principal itself

P: Outstanding principal
r_f: Foreclosure rate
E: EMI
n: Months remaining

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a floating home loan carries no charge

Outstanding principal: ₹18,00,000
Foreclosure charge: 2%
Interest rate on the loan: 9.5%
Months remaining: 96
Current EMI: ₹24,000
Rate type: Floating

Foreclosure charge₹0

96 EMIs of 24,000 is 23,04,000 against 18,00,000 outstanding

Open this example

a fixed loan does

Outstanding principal: ₹18,00,000
Foreclosure charge: 2%
Interest rate on the loan: 9.5%
Months remaining: 96
Current EMI: ₹24,000
Rate type: Fixed

Foreclosure charge₹36,000

boundary: 2% of the outstanding principal

Open this example

Method and limits

What it assumes

The EMI is level and the loan runs to term otherwise.

What it deliberately does not model

Some lenders apply the charge to the original sanctioned amount rather than what is outstanding.
Tax relief on home loan interest is not netted off here and reduces the true saving.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

Can a bank charge me to foreclose?: Not on a floating-rate loan to an individual borrower in India. That is prohibited. Fixed-rate loans and loans to businesses can and usually do carry a charge.
Is closing early always worth it?: Financially, when the interest saved exceeds the charge, which it usually does. The counter-argument is what else the money could earn, and losing the interest deduction if you claim one.