When you prepay a home loan, the bank asks one question: lower the EMI or finish the loan sooner? The difference in interest can be large, and most people answer without seeing it. This sheet works out both, side by side, for your loan.
⬇ Download: Reduce EMI or tenure calculator (.xlsx, free)Three sheets in one file
- Prepayment: your outstanding loan, rate, EMIs left and the prepayment, then option A (lower EMI, same end date) against option B (same EMI, fewer EMIs), with the interest each saves.
- Rate reset: when a floating rate changes, the EMI you'd pay to keep the end date against the months you'd add to keep the EMI, and the extra interest of each.
- Letter to bank: a part-prepayment request that fills in your amount from the first sheet, ready to copy.
The formulas
Prepayment formulas in Excel
EMI now: =PMT(B6/1200,B7,-B5)
Option A, new EMI: =PMT(B6/1200,B7,-(B5-B8))
Option B, EMIs left: =ROUNDUP(NPER(B6/1200,-B11,B5-B8),0)
Option B interest: =B11*NPER(B6/1200,-B11,B5-B8)-(B5-B8)
Extra saved by B: =B24-B18
Under RBI's rules on floating-rate resets, banks must offer you the choice of a higher EMI, a longer tenure or both when the rate changes, and individual floating-rate home loans carry no prepayment charge.
Prefer it online? Use the reduce EMI or tenure calculatorFrequently asked questions
- Is it better to reduce EMI or tenure after a prepayment?
- Reducing tenure saves more interest, because the same EMI pays the loan off faster. Reducing EMI frees up monthly cash. The sheet shows the rupee difference for your own loan.
- How do I ask the bank to reduce tenure instead of EMI?
- In writing, with the prepayment. The third sheet in the file is a ready letter that fills in your amount.
- What happens to my EMI when the home loan rate goes up?
- Banks usually extend the tenure and keep the EMI unless you ask otherwise. The rate-reset sheet shows the extra interest that costs against raising the EMI.