Home loans use a reducing balance method. In early EMIs, your outstanding principal is highest, so the interest component is largest. Over time, as you repay principal, the interest portion shrinks and principal portion grows.
When does the principal repayment exceed interest?
The crossover point (where principal > interest in each EMI) typically happens in the second half of your loan tenure. For a 20-year loan at 9%, this crossover happens around year 12–13.
How does prepayment affect the interest-principal ratio?
Prepayment directly reduces outstanding principal, which reduces future interest payments. Even one prepayment in year 3–5 can save lakhs in total interest.
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