How is home loan EMI calculated?
Banks in India use the reducing balance method. Interest for each month is charged on the outstanding loan amount, not on the original loan. The EMI stays fixed, but in the early years most of it goes towards interest and only a small part reduces the principal.
EMI = P × r × (1 + r)^n / [ (1 + r)^n − 1 ]
- P = Loan amount (principal)
- r = Monthly interest rate = yearly rate ÷ 12 ÷ 100
- n = Loan tenure in months
Example: A ₹50 lakh home loan at 8.5% for 20 years has an EMI of ₹43,391. Over 20 years you pay ₹1.04 crore in total, of which ₹54.1 lakh is interest. Reduce the tenure to 15 years and the EMI rises to ₹49,237, but total interest drops to ₹38.6 lakh.
Home loan interest rates in India (indicative)
| Lender | Starting rate (p.a.) | Max tenure |
|---|---|---|
| SBI | 8.00% – 8.50% | 30 years |
| HDFC Bank | 8.20% – 8.70% | 30 years |
| ICICI Bank | 8.25% – 8.75% | 30 years |
| LIC Housing Finance | 8.25% – 8.90% | 30 years |
| Bank of Baroda | 8.00% – 8.60% | 30 years |
Rates change with the RBI repo rate and your credit score, so treat the table as a rough guide and confirm the current rate with the lender. A credit score above 750 usually gets you the lowest slab.
Tips to reduce your home loan EMI or interest
- Pay a bigger down payment. A smaller loan means a smaller EMI and much less interest over 20 years.
- Prepay whenever you get a bonus. Floating rate home loans have no prepayment penalty, and even one extra EMI a year cuts years off the loan.
- Choose the shortest tenure you can comfortably afford. A longer tenure lowers the EMI but increases total interest sharply.
- Compare lenders every couple of years. A balance transfer to a lender charging 0.5% less can save lakhs on a large loan.
- Keep the EMI below 40% of your monthly take-home pay so other goals are not squeezed.
Tax benefits on home loan
- Section 24(b): interest up to ₹2 lakh per year is deductible for a self-occupied house (old tax regime).
- Section 80C: principal repayment up to ₹1.5 lakh per year, including stamp duty and registration charges in the year of purchase.
- Section 80EEA: an extra ₹1.5 lakh on interest for affordable housing loans sanctioned between April 2019 and March 2022.
- Under the new tax regime these deductions are not available for a self-occupied property, so compare both regimes with our income tax calculator.
Frequently asked questions
What is the EMI for a ₹30 lakh home loan?
At 8.5% for 20 years the EMI works out to ₹26,035 per month. For 25 years it is ₹24,157, and for 15 years it is ₹29,542. Move the sliders above to check any amount and rate.
How much home loan can I get on a ₹50,000 salary?
Most banks allow an EMI of up to 50% of your net monthly income. With ₹25,000 as the maximum EMI, you could get roughly ₹29 lakh at 8.5% for 20 years. Existing EMIs reduce this amount.
Does the EMI change if interest rates go up?
For floating rate loans, banks usually keep the EMI the same and increase the tenure instead. If the tenure cannot be extended further, the EMI is increased. Fixed rate loans keep the same EMI throughout.
Is it better to prepay a home loan or invest the money?
If your loan costs 8.5% and you expect 12% from equity funds over the long term, investing can give more. But prepayment gives a guaranteed, risk-free saving, which many people prefer. A mix of both works well.
What does the amortization schedule show?
Click "Show amortization details" to see, for every year of the loan, how much of your payments went to principal, how much to interest, and the balance still outstanding.
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View allDisclaimer: This calculator is for information purposes only. Results are estimates based on the inputs you provide and do not guarantee any returns. Please consult a qualified financial advisor before making investment or tax decisions.