Anjali and her husband Rajan had been saving for 6 years for a house in Chennai. They had ₹8 lakhs saved. The flat they loved cost ₹45 lakhs. "Loan lena padega," Rajan said. "How much EMI can we pay?" Anjali asked. Neither of them knew how to calculate it. They visited 3 banks before someone told them the simple formula.
A home loan is the biggest financial decision most Indians make. Get the EMI wrong and you're stuck for 20 years. Here's how to figure out what you can actually afford — with our free EMI calculator to run the numbers instantly.
How Is Home Loan EMI Calculated?
EMI uses the reducing balance formula. Every month you pay interest on the remaining principal plus a portion of principal itself:
EMI = P × r × (1+r)^n / ((1+r)^n − 1)
Where P = loan amount, r = monthly interest rate, n = tenure in months.
Example
₹30 lakh loan, 8.5% rate, 20 years = ₹26,035/month EMI. Total interest over 20 years: roughly ₹32.5 lakhs. You pay back more in interest than the loan amount itself.
Current Home Loan Interest Rates 2026
Rates as of June 2026 — check with your bank for current rates before applying.
| Bank | Home Loan Rate (p.a.) |
|---|---|
| SBI | 8.50% – 9.85% |
| HDFC Bank | 8.70% – 9.95% |
| ICICI Bank | 8.75% – 9.90% |
| Bank of Baroda | 8.40% – 10.60% |
| Axis Bank | 8.75% – 13.30% |
Rates vary based on CIBIL score, loan amount, and employment type. Rates shown are indicative — verify with your bank before applying.
Floating vs Fixed
Floating rates change with RBI repo rate — lower now but can rise. Fixed rates lock your EMI but start 0.5–1% higher. Most Indians choose floating for lower initial EMI.
How Much EMI Can I Afford?
Banks use the FOIR rule (Fixed Obligation to Income Ratio) — total EMIs should not exceed 40–50% of monthly take-home salary. Use our Loan Eligibility Calculator for a personalised estimate.
Example: If take-home is ₹80,000/month, max comfortable EMI = ₹32,000–₹40,000/month.
- At 8.75% for 20 years, ₹32,000/month EMI ≈ ₹36 lakh loan
- At 8.75% for 20 years, ₹40,000/month EMI ≈ ₹45 lakh loan
Know your in-hand salary first — see how to calculate in-hand salary from CTC.
Shorter vs Longer Tenure — Real Numbers
For a ₹50 lakh loan at 8.75% (calculated using the standard EMI formula):
| Tenure | Monthly EMI | Total Interest | Total Payment |
|---|---|---|---|
| 10 years | ₹62,663 | ₹25.2 lakhs | ₹75.2 lakhs |
| 15 years | ₹49,972 | ₹40.0 lakhs | ₹90.0 lakhs |
| 20 years | ₹44,186 | ₹56.0 lakhs | ₹1.06 crore |
| 30 years | ₹39,335 | ₹91.6 lakhs | ₹1.42 crore |
Key insight: Choosing 20 years over 30 years saves approximately ₹36 lakhs in total interest — while adding only ₹4,851 to your monthly EMI.
Prepayment Impact
Partial prepayment saves significant interest, especially in the early years when most of your EMI goes toward interest — not principal.
On a ₹50 lakh / 8.75% / 20-year loan, making a ₹2 lakh prepayment in year 3 typically:
- Reduces tenure by approximately 18 months
- Saves approximately ₹3–4 lakhs in total interest
Even one extra EMI per year can cut your loan tenure by 2–3 years. Most banks have removed prepayment penalties on floating-rate home loans per RBI guidelines — confirm in your loan agreement.
Tips to Reduce Home Loan EMI
- Higher down payment — 20% minimum, 30% if possible. Lower loan = lower EMI.
- Shorter tenure — if income allows, 15–20 years saves lakhs in interest vs 30 years.
- Balance transfer — if another bank offers 0.5% lower, transfer saves lakhs over the loan term.
- Prepay early — lump sums in years 1–5 have the highest interest-saving impact.
Documents Needed for Home Loan
- Last 3 months salary slips + Form 16
- 6 months bank statements
- ITR for last 2 years
- Property documents (sale agreement, approved plan)
- KYC — Aadhaar, PAN, address proof
Frequently Asked Questions
What is a good home loan interest rate in India in 2026?
Home loan rates in India in 2026 range from approximately 8.40% to 10.60% depending on the bank, your CIBIL score, and the loan amount. Rates starting from 8.40-8.75% are available for applicants with CIBIL scores of 750+ — verify with your bank for the current applicable rate.
Should I choose a 20-year or 30-year home loan tenure?
A shorter tenure means higher monthly EMI but significantly less total interest paid. For example, on a ₹50 lakh loan at 8.75%, choosing 20 years over 30 years saves approximately ₹36 lakhs in total interest — while increasing your monthly EMI by only around ₹5,000. If your income allows it, a 15-20 year tenure is usually the better financial choice.
How much home loan can I get on a ₹1 lakh salary?
Most banks follow the FOIR rule — total EMIs should not exceed 40-50% of take-home salary. On ₹1 lakh take-home, you can comfortably afford ₹40,000-₹50,000 EMI per month. At 8.75% for 20 years, that translates to approximately ₹45-57 lakhs loan eligibility (subject to your CIBIL score and existing EMIs).
Does prepaying a home loan make sense?
Yes, especially in the early years when most of your EMI goes toward interest. Even a single extra EMI per year can reduce your loan tenure by 2-3 years and save lakhs in total interest. Check your loan agreement for any prepayment charges (most banks have removed prepayment penalties on floating rate home loans as per RBI guidelines).