All about home loan pre-closure


Prepayment of a home loan before the scheduled mortgage period is referred to as home loan pre-closure. There are several reasons why one might choose to pre-close a home loan, including the opportunity to secure a lower interest rate through refinancing. By opting for pre-closure, borrowers have the potential to save a significant amount on interest payments.

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.

Also Read: How are NBFCs providing housing loans in India? What is its impact?

Home loan pre-closure charges

  Pre-closure charges Prepayment charges
Axis Bank No No
Andhra Bank No  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  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
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

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.

Also Read: A quick guide to preparing yourself financially to buy a house

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.

Also Read: Latest RBI Guidelines for Home Loans 2024

Frequently Asked Questions

Ans 1. 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.

Ans 2. Pre-closing home loans cannot help you become free from debt soon by saving on interest.

Ans 3. The minimum tenure for a home loan is 12 months.

Ans 4. 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.

Ans 5. No. CIBIL scores will not be affected by prepayment.