Home Loan Prepayment

EMI uses the standard reducing-balance formula. Each month, interest is charged on the outstanding balance, and everything else in your payment reduces principal. Adding extra to the monthly payment goes entirely to principal, which compounds forward — shrinking every future month's interest, which is why extra EMI saves far more than its face value suggests over a long tenure.

Home loan interest is deductible up to ₹2L/year under Section 24(b) for a self-occupied property, and principal repayment counts under Section 80C (within its ₹1.5L combined limit) — factor this tax benefit into the real cost of your EMI before comparing prepayment against investing instead.