No pre payment penalties on Home Loans: Axis Bank

December 22, 2009: Home loan customers of Axis Bank have good news after the bank has decided not to charge pre-payment penalties to its home loans even when customers shift a loan to a competing bank. Citing 'cost of money' as a reason many lenders have imposed pre-payment penalties when any of their customers seeks to refinance a home loan through fresh loans at lower rates.

Following the move by Axis Bank, other major banks like State Bank of India (SBI), HDFC and ICICI Bank may also initiate the same benefit to their customers, reports Financial Chronicle. Now, Axis Bank is the only bank that does not charge any pre-payment penalty from home loan customers either for part pre-payment or full pre-payment. "At Axis Bank, we believe customers have the right to exercise their choice to shift if they find a rate advantage," said Manju Srivatsa, President of Retail banking at Axis Bank.

Currently, SBI and Punjab National Bank have no pre-payment charges if the customer prepays from own resources or if half of the loan is repaid. However, if the pre-payment is to be refinanced by any other institution or bank, the customer has to pay two percent penalty on the amount paid. HDFC allows pre-payment of only 25 percent of the opening balance at a time without any charge. For any amount above that, there is a pre-payment penalty of two percent. ICICI Bank allows pre-payment of a loan if 12 equated monthly installments (EMI) are kept as outstanding. In case of complete closure of the home loan, the bank charges a penalty of two percent of the amount prepaid.