How your home loan EMI is calculated
Your EMI is fixed so that the loan, with monthly reducing-balance interest, is fully repaid by the end of the tenure. Early EMIs are mostly interest; later EMIs are mostly principal. The processing fee is paid upfront, so we also show an APR: the effective yearly rate once the fee is included.
Where to find your numbers: the sanctioned amount, rate, tenure and fee are on the sanction letter and the Key Facts Statement. If you already have a loan, use the outstanding principal, current rate and EMIs left from your latest loan statement or the lender's app, not the original figures. After a few rate changes, the two can be very different.
20 years vs 30 years
A ₹50 lakh home loan at 8.5%:
| EMI over 20 years | ₹43,391 |
| Total interest over 20 years | ₹54,13,942 |
| EMI over 30 years | ₹38,446 |
| Total interest over 30 years | ₹88,40,023 |
The 30-year loan lowers the EMI by ₹4,945 a month but costs ₹34,26,081 more in interest. Planning to prepay? Use the part-payment calculator.
Even on the 20-year loan, ₹4,21,183 of the ₹5,20,692 you pay in the first year goes to interest. That is why prepayments in the early years save the most.
Floating rates and the silent tenure reset
Most home loans in India are floating-rate. Bank loans are linked to an external benchmark, usually the RBI repo rate (an EBLR or RLLR loan): your rate is the benchmark plus a spread fixed at sanction. When the repo rate moves, your rate follows at the next reset date. Housing finance companies often use their own internal benchmark instead, which can move differently.
When rates rise, many lenders keep your EMI the same and quietly add months to the end of the loan. Take the 20-year loan above and assume the rate rises to 9.5% after 36 EMIs:
| Outstanding at reset | ₹46,74,307 |
| EMIs left before the change | 17 yrs |
| EMIs left if the EMI stays the same | 20 yrs 3 mos |
| New EMI if the tenure stays the same | ₹46,265 |
A one-point rise adds 3 yrs 3 mos to the loan if the EMI is held steady. RBI's rules on floating-rate resets require lenders to explain the change and let you choose a higher EMI, a longer tenure or a combination, and to offer a switch to a fixed rate where available. Choosing a higher EMI usually costs far less over the life of the loan. Read more in how a repo rate change affects your EMI.
How much the bank will fund
RBI caps home loans by loan-to-value (LTV): up to 90% of the property value for loans up to ₹30 lakh, 80% for loans above ₹30 lakh up to ₹75 lakh, and 75% above that. Many lenders exclude stamp duty and registration from the value they fund, so those usually come from your own pocket.
| Property worth ₹25,00,000: maximum loan | ₹22,50,000 |
| Property worth ₹60,00,000: maximum loan | ₹48,00,000 |
| Property worth ₹1,20,00,000: maximum loan | ₹90,00,000 |
Your income sets a second limit. The home loan eligibility calculator checks both and shows which one binds.
Ways to pay less on a home loan
- Watch your spread, not just the repo rate. New customers are often offered a lower spread than existing ones. Ask your lender to move you to the current spread; a small conversion fee can pay for itself.
- Prepay freely. RBI does not allow foreclosure or part-payment charges on floating-rate loans to individuals for non-business purposes.
- Check your EMIs-left count every year. If it has grown, raise the EMI rather than let the tenure drift.
- Claim the tax deductions you are entitled to. Under the old regime, 24(b) and 80C can lower your effective cost. The home loan tax benefit calculator shows how much.
- Avoid bundling a large insurance premium into the loan. You pay interest on it for decades. Compare a separate term policy.
Assumptions
- Fixed rate for the full tenure. Floating rates change with the lender's benchmark.
- No pre-EMI or broken-period interest during construction or before the first EMI.
- Processing fee is paid upfront; GST at 18% if selected.
Frequently asked questions
How is home loan EMI calculated?
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the loan amount, r is the monthly rate (annual rate ÷ 12 ÷ 100) and n is the tenure in months. On a floating-rate loan this EMI is recalculated, or the tenure is changed, each time the lender resets your rate.
Should I choose a longer tenure for a lower EMI?
A longer tenure lowers the EMI but sharply increases total interest. If you choose a longer tenure for affordability, plan to prepay whenever you can. Floating-rate home loans to individuals carry no prepayment charge, so a 30-year loan with regular prepayments can work out close to a 20-year one.
How much home loan can I get on my salary?
Lenders usually keep all your EMIs within about 40% to 50% of your net monthly income, and RBI caps the loan at 90%, 80% or 75% of the property value depending on the loan size. Exact limits vary by lender and your credit profile. The home loan eligibility calculator works through both limits.
Are there tax benefits on a home loan?
Under the old tax regime, interest on a self-occupied home is deductible up to ₹2 lakh a year under Section 24(b), and principal repayment counts towards the ₹1.5 lakh Section 80C limit. These deductions are not available for a self-occupied home under the new regime. Confirm with a tax adviser.
My home loan rate went up but my EMI did not change. Why?
Many lenders keep the EMI the same and extend the tenure when rates rise. You only notice it in the loan statement, where the number of EMIs left has grown. RBI requires lenders to tell you about such changes and to give you a choice between a higher EMI, a longer tenure or a mix, plus the option to prepay.
What is pre-EMI on an under-construction flat?
When the bank releases the loan in stages as construction progresses, you pay interest only on the amount released so far. That is pre-EMI. It does not reduce the principal. Full EMIs start after the final disbursement, or earlier if you ask. Long construction delays can make pre-EMI a large hidden cost.
Should I count on a PMAY subsidy when planning my EMI?
No. Government housing schemes have changed several times, with different income limits, property sizes and timelines. Plan your budget on the full EMI shown here. If you think you qualify for a current scheme, confirm eligibility with your lender in writing, and treat any benefit as a bonus rather than part of your repayment plan.