Home Loan Foreclosure

Many middle-class individuals borrow home loans to buy their dream house or a flat. Then they start paying monthly EMIs on those home loans. But sometimes having excessive money, some people wish to repay the outstanding loan amount in full without paying further EMIs and this is known as the Home Loan Foreclosure. When an individual is not willing to pay further EMIs and wishes to pay off the home loan in full before the expiry of loan tenure then it is known as foreclosure of home loans. Foreclosure helps the individual to save interest on the remaining principal amount and he could invest that money somewhere else. Let’s see the fee charged by some banking and non-banking institutions when you foreclose a home loan.

Foreclosure Fee on Home Loan

You can see the table below where the foreclosure fee is present in different banking and non-banking institutions.

Banks and NBFCsHome Loan Foreclosure Fees
DHFL2% of the Outstanding Amount
Oriental Bank of CommerceNIL
Aditya Birla Housing Finance (ABHFL)2% of the Outstanding Amount
Federal Bank0% to 3% of the Outstanding Amount
State Bank of India (SBI)NIL
Bank of BarodaNIL
Canara BankNIL
Reliance Home Finance2% to 5% of the Outstanding Amount
YES BANK4% of the Outstanding Amount
LIC Housing Finance (LIC HFL)0% to 3% of the Outstanding Amount
Axis BankNIL

So, you will have to pay the above foreclosure charges if you are closing your loan before the expiry of the tenure. Different banks and NBFCs have different foreclosure charges.

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Things to Check Before Closing Home Loan

  • Know your outstanding home loan balance on the present day.
  • Then check the interest you paid on the home loan.
  • See the prepayment penalty or the foreclosure charges of the home loan.
  • Calculate the savings that you get from foreclosing the home loan.
  • You must have the lump sum amount ready for the loan closure.
  • Choose the payment option at your convenience.
  • Confirm the closure with the bank once it was paid and take the NOC and pledged collateral papers.

Process of Foreclosure Home Loan

  • Visit the bank branch from where you have taken the home loan.
  • Talk to your bank representative and ask for the loan closure form.
  • Fill up the loan closure request form and give it to the representative.
  • Wait for the bank confirmation.
  • Then check the loan balance amount that has to be paid.
  • Pay the outstanding balance via cheque, NEFT, IMPS, RTGS, or any other method.
  • Finally, ask for the NOC from your bank and close your home loan account.

Home Loan Foreclosure Letter

This letter is written to the lending institution in which you have to request for the home loan foreclosure. You will also have to provide the loan account detail like account number, type of loan, and the date of foreclosure. Then you will have to send the letter to the bank for the foreclosure.


Now you know what is meant by the home loan foreclosure and how it is beneficial. On the other hand, you must also know the process of foreclosing the loan and points you should remember before initiating the closing process. The foreclosure of the loan will remove the interest burden and the EMI burden from the borrower.

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  • Home Loan Interest Rates October 2023
    Axis Bank8.75% - 9.15%
    Bank of Baroda8.50% - 10.60%
    Citibank8.75% - 9.15%
    HDFC8.50% - 9.40%
    ICICI Bank9.00% - 9.85%
    Indiabulls Housing Finance Limited8.65%
    Kotak Bank8.85% - 9.40%
    LIC Housing8.50% - 10.50%
    Piramal Capital & Housing Finance10.50%
    PNB Housing Finance8.50% - 10.95%
    Reliance Home Finance8.75% - 14.00%
    State Bank of India/SBI9.10% - 9.65%
    Tata Capital8.95% - 12.00%
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