There are many of us who wants to be debt free quickly. One of the biggest debts that anyone can have is a housing loan. Therefore I am sure many people want to pay down their housing loan as soon as possible.
In order to pay down your home loan quickly, you have to make additional payments in addition to your monthly mortgage payments. These additional payments are known as "prepayments". One thing that many people wonder about before making prepayments is "Will my bank charge me a penalty for making a prepayment?" The answer is "It depends".
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It really depends on the particular housing loan package that you have taken up. Some housing loan contracts allow you to make prepayment on specific dates. Some require you to give them a one month to three month's worth of notice before you make that prepayment. Others do not allow you to make any prepayment unless you are out of the contractual lock in period.
You can try making a prepayment even if your bank does not allow you to do so. Do take note that doing so, can cause your bank to impose a penalty of 1% to 1.5% on the prepaid amount.
Read through the details carefully if you do not know how your contract runs. If you are unable to determine your current standing, try sending your contract to your bank officer or broker to see you are eligible to do a prepayment.
You can try to do as many prepayments as you want and many people do that. Prepayment can help you in building up equity in your house and accelerate full ownership at a faster rate of time. Different people have different ideas about prepayments. Some believes lengthening payments are better while others believe that paying off the housing loan takes away a huge burden. Try to understand if prepayments are for you and if you are able to make any early payments. If you are, then you definitely can do a prepayment.
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