Let’s say your mortgage principal quantity was 1L, and your EMI is 1,000. This EMI quantity has 2 elements, curiosity and principal.
For almost all of the period of the mortgage tenure, curiosity quantity will probably be greater than principal. For instance for a 30 yr mortgage curiosity will probably be greater than principal for greater than 22 years or so.
So in the event you pre-pay 1,000, and don’t specify how you want this 1,000 to be directed, the mortgage firm will apply your 1,000 in direction of each curiosity and principal (it’s such as you paid 1 month EMI prematurely)… however solely a small fraction of your 1,000 is utilized in direction of decreasing your principal quantity.
However in the event you specify that you really want your 1,000 to be utilized in direction of principal solely, then they must cut back the principal quantity by 1,000, which may imply the equal of atleast 2 EMI funds (if it’s within the first 22 years of the 30 yr mortgage quoted above)
Hope this clarifies issues.
Replace: This isn’t legitimate in India, sorry