Home loan prepayment and foreclosure are important terms that engineers should understand before applying for a home loan. Prepayment refers to the payment of a portion or the entire outstanding home loan amount before the loan’s maturity. On the other hand, foreclosure means the full payment of the outstanding home loan amount before the maturity period.
Prepayment can help reduce the total interest payable on the loan and the loan tenure, while foreclosure helps clear the loan amount entirely and save on the interest component. However, banks may charge prepayment or foreclosure penalties, which engineers should be aware of before deciding to proceed with such actions.
