Prepayment charge on Home Loan

Prepayment Charge

RBI as well as NHB (National Housing Bank) has abolished prepayment charge/penalty on prepayment of home loan from this April 2012 onwards. Some Banks were charging 1-2% penalty on prepayment of their home loans.

Now from April 2012 onwards Bankers are bound to waive the prepayment penalty on pre payment of Home Loans. The borrowers on floating rate of interest will need not to pay prepayment charge whether its paid from own source or it’s a takeover by any other banks. However borrowers on fixed rate of interest would get this benefit only on payment from its own sources.

The borrowers on fix-o-floaty scheme (where interest rate is fixed for certain period & floating thereafter) will be considered as fixed interest rate borrower without considering the fact that whether the borrower is at the time of prepayment is under fixed or floating rate of interest. Therefore they will get the benefit of prepayment charge abolishment only if they pay the amount from their own sources.

The borrowers with good track record & paying a high floating rate of interest, mainly the borrowers who borrowed long time back, can consider for takeover of their loan from any other bank to minimize the interest burden. By the same time borrowers with idle money in hand can consider for prepayment to utilize the idle money by saving interest on their home loan.

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