Invest vs Prepay Home Loan Calculator India

Formula used

The prepayment scenario keeps the EMI unchanged and estimates a shorter tenure, then calculates remaining interest saved. The investment scenario compounds the same lump sum at the entered gross return minus annual drag until the original loan end. The comparison is pre-tax and excludes home-loan tax benefits unless represented in your adjusted inputs.

Example calculation

For a Rs 50 lakh outstanding loan at 8.5% with 15 years left, compare using Rs 5 lakh for immediate principal reduction versus investing it at a conservative after-drag return.

How to use this calculator

1. Enter outstanding principal, current rate and remaining EMI count.
2. Enter the lump sum available after emergency reserves.
3. Set a conservative gross investment return and annual drag.
4. Compare interest saved with the investment gain over the original horizon.
5. Retest at lower returns and after checking tax and lender terms.

Important assumptions

• The prepayment keeps EMI unchanged and reduces tenure.
• The loan rate and investment return remain constant in each scenario.
• Annual drag is a simplified proxy for investment cost and tax effects.
• Tax deductions, prepayment charges and liquidity value are excluded.

Common mistakes to avoid

• Using an optimistic equity return as a certainty.
• Ignoring emergency liquidity and near-term goals.
• Comparing gross return with loan rate without tax and cost drag.
• Forgetting that floating home-loan rates can change.

When this tool is useful

• When you want a fast estimate before making a financial or salary decision.
• When you want to compare different assumptions in seconds.
• When you want to understand the formula behind the result.