Calculator: Prepay Home Loan or Invest?

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Use this calculator to  analyze if you should  pre-pay your home loan asap or invest instead. This is now republished after correcting a bug pointed out by Ankush.

I had posted an illustration of prepay vs invest in June  but did not post the associated sheet. I have now modified the sheet to include new tax rules. Future changes in rules can also be easily accommodated with user entry.

The money that is free for investments (inevstible surplus) is assumed to grow at some interest rate (can be modified). Whenever there is a need, withdrawals are made from the corpus.  This will work best if you use only long-term goals.


1) Details about your home loan and the lump sum you have. An  amortization table will be created. Will post the amortization sheet separately.

2) Details about retirement and your other financial goals (preferably long-term, 7Y-plus)

The result would look something like this



Green line: This is how your investible surplus would have grown, had you not taken the loan.

The black dot represents the retirement corpus that you need (taking into account existing corpus)

Blue Line: Growth if you invest the lump sum (fully or partially)

Red line: Growth if you pre-paid the home loan with the lump sum (fully or partially)

The bumps in the lines represent withdrawals for different goals (coloured dots).

The sheet is rather complex. Therefore I request you to please play around with it and let me know if you spot anything funny.

My take: This is not an either-or question. Prep-pay in chunks without neglecting investments. Read more: Illustration: Pre-pay Home Loan or invest

Vinay: I will include your suggestions in the amortization sheet to be posted soon.

Noted: Updated with bug pointed out by Ankush. First published: Nov 13 2014.

Download the prepay home loan vs. invest calculator

Thanks to Mohit Pandey for pointing out an error in the section 24 limit cell.

Thanks to Naveen for pointing out an error in the retirement planner sheet.


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About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
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  1. Cell B24 in sheet “Retirement Planner” is erroneous as it links to a previous sheet. Hence, the gross pre-tax salary is not calculated correctly and shows a higher number than it should.

  2. Hello Pattu,

    Of late, I have been receiving two emails for any new post on your website – one email shows the post made by ‘freefincal’, and the other is shown as made by ‘pattu’.

    I checked on the “Manage your subscriptions” link, and it shows only 1 active subscription on that page for my email ID.

    Can you help me with the settings to receive just one of the emails?


      1. Yes, I have noticed this for a few posts since the past few days.
        Can’t say for sure whether it’s for all the posts or not.

        I will keep an eye on the next few posts and let you know if this is repeating for all of them.

  3. sir do we really need big excel calculation to know the bad effect of home loan ?

    கைப்புண்ணுக்கு கண்ணாடி எதற்கு

    1. It makes sense if
      1. You might need this lumpsum money you may want to use to prepay then investing provides liquidity..
      2. Another important point is if in case of a businessman if he can invest and get better returns than the loan interest rate, the person stands to gain..

  4. Hi sir

    I have followed your posts for quiet long and this is my first comment. I would request you to consider post about what to decrease if someone is prepaying. I.e should he decrease the EMI or tenure.

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