Finance question
Should I prepay my home loan or invest the extra money?
Last updated 2026-09-17
Quick answer
Prepayment saves loan interest at a rate you already pay (say 8–9% on a floating home loan) with near-certainty. A SIP might earn more or less than that after tax. If the loan rate is 9% and you only trust 8% from debt funds, prepay. If you have a 15-year equity horizon and an emergency fund, investing can win — it can also lose. The interactive prepayment vs investment article compares both on the same horizon, including a break-even return — not a slogan winner.
Calculate your numbers
Tables below use stated assumptions. Change rate, tenure or income in the calculator for your case.
Open Part paymentCertainty vs expected return
Home-loan interest you do not pay is a locked-in saving. Equity SIP return is not locked in. Old-regime borrowers also weigh section 24 interest deduction — new regime generally does not allow it, which tilts slightly toward prepayment for those who already chose new.
Worked comparison
₹50 lakh at 8.5% for 20 years. Extra ₹10,000 a month in the part-payment calculator cuts tenure and interest. A one-time extra ₹1 lakh vs investing that ₹1 lakh is modelled live in the prepayment vs investment article, with keep-EMI vs cut-EMI and a cash-flow break-even. Nobody knows the investment return in advance.
Formula
Interest saved ≈ original schedule interest − shortened schedule interest (part-payment tool). SIP side = future value at an assumed rate minus amount invested. These two units are not the same unless you pick a common time horizon.
Example scenarios
Same ₹10,000 a month — two models, not a recommendation
| Use of ₹10,000 | What the site can show |
|---|---|
| Part-payment (keep EMI) | Interest saved and months saved on the home-loan part-payment calculator |
| SIP at 12% assumed | Corpus on the SIP calculator — 12% is not promised |
| SIP at 8% assumed | Closer to a home-loan rate; often below prepay benefit after equity risk |
What changes the answer
- Loan interest rate
- Your assumed SIP return
- Tax regime (interest deductibility)
- Emergency fund status
Things to consider
- Never invest the last 3 months of expenses while a loan EMI is due.
- Floating-rate loans can rise; that increases the value of prepayment.
- Qualitative framework. No single IRR winner is claimed.
Results are educational estimates, not tax, legal, investment, or medical advice, and not a loan offer. Verify filings and payments with the official authority or a qualified professional.
FAQs
Floating-rate home loans in India often have none, but confirm with the lender. The calculator does not subtract a penalty.