HDFC Bank home loan EMI

On a ₹50 lakh loan at 7.75% over 20 years the EMI is ₹41,047. Of the very first one, ₹32,292 is interest and ₹8,756 is principal — 78.7% of the payment does nothing to reduce what you owe.

That ratio unwinds slowly. After five years and ₹24,62,846 paid, the outstanding balance is ₹43,60,829: you have cleared ₹6,39,171, or 12.8% of the principal, having paid in nearly half the value of the loan. This is not a quirk of this bank — it is how amortisation works everywhere — but it is the single most surprising number on this page for most people, and it changes what prepayment is worth.

It also explains why the early years are when prepayment does the most good. Every rupee paid into principal early removes the entire remaining interest stream on that rupee. The same rupee paid in year eighteen removes almost nothing.

Stretching a ₹50 lakh loan from 20 years to 30 lowers the EMI from ₹41,047 to ₹35,821 — ₹5,226 a month. It raises total interest from ₹48.51 lakh to ₹78.95 lakh, an increase of ₹30.44 lakh. That is the trade, and it is rarely presented as one.

The reverse is equally true and much less used. Shortening the same loan to 15 years raises the EMI to ₹47,064, ₹6,017 more a month, and cuts total interest to ₹34.71 lakh — ₹13.80 lakh saved. If the higher EMI is affordable, that is one of the highest-return decisions available to a borrower, and it costs nothing but the discipline.

The reason lenders default to longer tenures is that the EMI is what gets tested against your income during underwriting. A longer tenure makes a larger loan approvable. That is a real benefit if it is the only way to buy the house; it is an expensive habit if you took it because nobody showed you the second column.

The RBI prohibits banks and housing finance companies from levying foreclosure charges or prepayment penalties on floating-rate term loans to individual borrowers. It applies whether you prepay from savings, from a bonus, or by refinancing with a competitor, and HDFC Bank’s own schedule confirms the position: premature closure on an adjustable-rate loan during the variable-rate period is nil.

The arithmetic is worth doing before you decide between prepaying and investing. ₹5 lakh into this loan at the end of year five removes 35 months of EMIs and nets ₹9,26,074. That is a guaranteed, tax-free return equal to the loan rate, which is a high bar for an alternative investment to clear after tax.

One caution on mechanics: ask explicitly for the tenure to be reduced rather than the EMI. Most lenders default to cutting the EMI, which keeps you in the loan for the original term and gives back a large part of the benefit. The saving above assumes the EMI stays where it is.

Every figure here is principal and interest. The processing fee — up to 0.50% of the loan or ₹4,000 for a salaried applicant, plus 18% GST — is not in it, and neither are stamp duty, memorandum of deposit of title deeds, registration, CERSAI charges or legal and technical valuation. On a metro purchase those can run to several lakh and are frequently the largest cash requirement at sanction.

Nor does it include insurance sold alongside the loan. A term or property cover bundled into the sanction is often financed as part of the loan, which means you pay interest on the premium for the life of the mortgage. It may still be worth buying; it is worth buying deliberately and comparing separately rather than accepting it at the counter.

And the rate itself is not fixed. This is a repo-linked loan that resets at least quarterly, so treat every total-interest figure above as what happens if the rate never moves, which it will.