Are there any penalties for paying off my home renovation loan early?

The decision to prepay a home renovation loan should factor in potential prepayment costs.

There are usually no charges for foreclosing your loan early for adjustable-rate loans. However, fixed-rate loans often have a prepayment penalty if you refinance or transfer your loan to foreclose it. This penalty is typically 1-2% of the outstanding principal amount.

So, foreclosing using one's own funds is a feasible option to save on interest costs without incurring charges. However, refinancing to foreclose on a fixed-rate loan will attract charges due to the loss of interest income for the financial institutions.

Carefully read the loan agreement to be aware of prepayment terms. If full foreclosure is not possible immediately, consider making part prepayments periodically to reduce your principal. This will help shorten the tenure and total interest payable.