Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial

NHB removes pre-payment penalty by Housing Finance Companies

If you have a loan from a housing finance company like LIC Housing Finance or HDFC, you will feel a little bit better knowing that the HFC regulator – National Housing Bank or NHB – has removed pre-payment penalties from such housing loans.

If you have a floating rate loan, you will not pay a pre-payment penalty.

If you have a fixed rate loan, you get a charged a penalty only if you refinance from another financial institution. That means if you earn the money, or even borrow from your parents and pay it back (from your “own” sources)- you don’t need to pay a pre-payment penalty.

Since NHB has no regulation on banks, this rule won’t be applicable for banks. But don’t be unhappy – I’m sure the RBI will follow suit soon, and it has already proposed it.

Also read: The Unnecessary Prepayment Penalty

  • Hi Sir,
    I have a loan from LIC since 2006. This condition of “Own” sources was applicable even then!. Also per year we can pre-pay 10% of outstanding amount as well.
    I am not sure if it was just limited ot LIC and now gets extended to all Housing Finance companies now. ITs another story that despite pre paying 1 lac and paying installaments of 22.7K per month, my outstanding is still 22 lacs on a loan of 25 lacs.
    God knows if i will be able to pay back this loan. I understand that the tenure of 20 years has also increased.