LAP Foreclosure Calculator
Planning to close your Loan Against Property (LAP) early? Calculate the exact amount you need to pay the bank, including hidden foreclosure penalties and GST.
Last updated: May 2026
Good news! RBI mandates zero foreclosure charges for individuals on floating rates.
Total Amount to Close Loan
Extra Foreclosure Charges
₹0
Foreclosure Breakdown
- Outstanding Principal:₹5,000,000
- Bank Penalty (0%):+ ₹0
- GST on Penalty (18%):+ ₹0
Reviewed by Sneha Iyer, CFP
•Certified Financial PlannerSpecializing in wealth management and retirement planning. Sneha validates the investment projection models and compound interest algorithms used across our financial tools. All mathematical models and regulatory data points have been verified for the current 2026 fiscal period.
What are Foreclosure Charges?
Foreclosure (or pre-closure) is when you decide to pay off your entire outstanding loan amount before the actual tenure ends. Banks lose out on future interest income when you do this, so they often charge a Foreclosure Penalty (usually 2% to 4% of the outstanding principal).
However, the Reserve Bank of India (RBI) has mandated that banks cannot charge foreclosure penalties on floating-rate loans taken by individual borrowers.
How to use this calculator
- 1Outstanding Principal — Check your latest loan statement and enter the remaining principal balance (not the total remaining EMIs).
- 2Select Loan Type — Choose whether you are an individual on a floating/fixed rate, or a business entity. This dictates if you are exempt under RBI rules.
- 3Enter Penalty Rate — If you are not exempt, check your loan agreement for the pre-closure penalty percentage (typically 4%).
- 4See Total Payoff — The calculator adds the 18% GST on the penalty amount to give you the exact cheque amount you need to give the bank.
Formula & example
Total Payoff Calculation
Example: A Private Limited Company closing a ₹50 Lakh LAP with a 4% penalty clause.
- Penalty Amount (4% of 50L): ₹2,00,000
- GST on Penalty (18% of 2L): ₹36,000
- Total Cheque Required: ₹52,36,000
Benefits
Avoid Surprises
Many borrowers forget that the bank charges 18% GST on the penalty fee, leading to bounced pre-closure cheques.
Compare Refinance Costs
If you are transferring your LAP to another bank for a lower interest rate, you must subtract these foreclosure charges to see if the switch is actually profitable.
Use cases
Balance Transfer (BT)
Calculating the exit cost of your current loan before moving it to a bank offering a cheaper rate.
Selling the Property
Figuring out the exact amount needed to clear the mortgage so the bank releases your original property papers to the new buyer.
Frequently asked questions
Does RBI allow foreclosure charges on LAP?+
If the loan is taken by an Individual (or co-applicants who are all individuals) on a Floating Interest Rate, RBI mandates NO foreclosure charges. If the loan is on a Fixed Rate, or if the borrower is a Non-Individual (Private Limited, LLP, Partnership), the bank is allowed to charge a penalty.
Is partial prepayment the same as foreclosure?+
No. Foreclosure means closing the entire loan. Partial prepayment means paying a lump sum to reduce the principal. The RBI rules for individual floating-rate loans apply to both: neither attracts a penalty.
How long does it take to get my property papers back?+
By RBI mandate, banks must release your original property documents within 30 days of full repayment/foreclosure. If they delay, they are liable to pay a penalty of ₹5,000 per day of delay.