What a home loan really costs
A ₹40 lakh loan at 8.5% for 20 years has an EMI of ₹34,713. Over 240 months you repay ₹83,31,103: the interest (₹43,31,103) is more than the loan itself. That is normal for a 20-year loan, and it is why the tenure and prepayments deserve as much thought as the rate.
How much loan can you get?
Banks look at your FOIR (fixed obligations to income ratio): all EMIs together are usually capped at 40–50% of net monthly income. They also lend at most 75–90% of the property value (90% only up to ₹30 lakh, as per RBI), so plan a down payment of 10–25% plus stamp duty and registration, which are not financed.
Tax benefit on a home loan
| Benefit | Old regime | New regime |
|---|---|---|
| Interest on self-occupied home | Up to ₹2 lakh a year | Not allowed |
| Principal repayment (80C) | Within ₹1.5 lakh 80C limit | Not allowed |
| Interest on let-out home | Full interest, loss set-off capped at ₹2 lakh | Against rent only, no set-off |
Check which regime is better with the deductions you have in the income tax calculator.
Fixed vs floating rate
Almost all home loans in India are floating and linked to an external benchmark, usually the RBI repo rate. When the repo rate moves, your rate moves within three months, and banks normally change the tenure rather than the EMI. If your tenure keeps getting longer after rate hikes, ask the bank to raise the EMI instead.
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Questions people ask
What is the EMI for a ₹30 lakh home loan for 20 years?
At 8.5% it is ₹26,035 a month. See the ₹30 lakh EMI table for other rates and tenures.
Is 20 or 30 years better for a home loan?
30 years gives a lower EMI (₹30,757 vs ₹34,713 on ₹40 lakh at 8.5%) but nearly ₹27.41 lakh more interest. A common approach is to take the longer tenure for safety and prepay whenever you can.
Does a prepayment reduce my EMI or my tenure?
Banks usually keep the EMI the same and shorten the tenure, which saves the most interest. You can ask them to lower the EMI instead. This calculator shows the tenure-reduction case.
Is there a penalty for prepaying a loan?
Not on floating-rate loans taken by individuals: RBI bars banks and NBFCs from charging prepayment or foreclosure fees on them. Fixed-rate loans and business loans can still carry a charge, usually 2–4%.