Understanding home loans in India
A home loan (also called a housing loan or mortgage) is a secured loan from a bank or housing finance company to buy, build or renovate a home. The property is the security, and you repay through equal monthly instalments (EMIs) over 5 to 30 years. Each EMI is part interest and part principal. Early on most of it is interest. In the default example above, the first year's EMIs pay about ₹4.2 lakh of interest and only about ₹1 lakh of principal.
How home loan interest rates are set
Most floating-rate home loans from banks are linked to an external benchmark, usually the RBI repo rate. Your rate is that benchmark plus a spread the bank fixes when it sanctions the loan. Since 1 October 2019 the RBI has required banks to link new floating-rate retail loans to an external benchmark, and the rate must be reset at least once every three months.
When the repo rate changes, your EMI or your remaining tenure changes at the next reset. The spread normally stays as sanctioned, which is why a lower spread is the most valuable thing to negotiate. Housing finance companies are not covered by this rule and usually price loans off their own benchmark rate.
Your credit score, the loan-to-value ratio, the loan amount and your type of employment all affect the spread you are offered. Lenders change their rates often, so use a current quote from the lender rather than any published table.
Three worked examples
| Loan | Rate | Tenure | EMI | Total interest |
|---|---|---|---|---|
| ₹50 lakh | 8.6% | 20 years | ₹43,708 | ₹54,89,953 |
| ₹1 crore | 8.75% | 25 years | ₹82,214 | ₹1,46,64,309 |
| ₹35 lakh | 8.4% | 15 years | ₹34,261 | ₹26,66,986 |
On the first loan, a prepayment of ₹1,00,000 at the end of every year from year 3 saves ₹14,84,339 of interest (about ₹14.84 lakh) and closes the loan 5.1 years early. Tick "Add a prepayment every year" above to try your own figures.
Tax deductions on a home loan
| Deduction | What it covers | Yearly limit |
|---|---|---|
| Section 22 24(b) in the 1961 Act | Interest on a loan for a home you live in, old regime only | ₹2,00,000 |
| Section 123 80C in the 1961 Act | Principal repaid, old regime only, within the one limit shared with PPF, ELSS, EPF and insurance | ₹1,50,000 |
| Section 131 80EEA in the 1961 Act | Extra interest for first-time buyers. Only for loans sanctioned from 1 April 2019 to 31 March 2022 on a home with a stamp duty value up to ₹45 lakh, so not for new loans | ₹1,50,000 |
From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act, so these deductions have new section numbers. The limits did not change. In the new regime there is no deduction for the home you live in. For a home you let out, the interest is deducted from the rent you receive in either regime. If you are in the 30% slab under the old regime and claim the full ₹2,00,000 of interest and ₹1,50,000 of principal, your tax falls by up to ₹1,09,200 a year (31.2% with the 4% cess, before any surcharge). The income tax calculator shows which regime leaves you better off.
What to compare between home loan offers
| What to check | Why it matters |
|---|---|
| Rate type | Floating rates move with the lender's benchmark. Fixed rates stay put but usually start higher, and some fixed loans convert to floating after a few years. |
| Spread over the benchmark | For most floating loans the spread is fixed at sanction, so it decides what you pay for the whole tenure. Compare spreads, not just today's headline rate. |
| Reset frequency | Bank loans on an external benchmark reset at least once every three months, so repo rate cuts and rises reach you quickly. |
| Processing fee | Usually a percentage of the loan or a flat fee, with GST on top. It is sometimes waived during offers, so ask. |
| Prepayment charges | RBI rules do not allow lenders to charge prepayment or foreclosure penalties on floating-rate loans taken by individuals for non-business purposes. Fixed-rate loans can carry a charge, so read the sanction letter. |
| Bundled insurance | Check whether a loan protection insurance premium has been added to the loan amount. Ask for the quote without it so you compare like with like. |
| Total cost | Put each offer's rate, tenure and fees into this calculator and compare the total interest, not the EMI alone. |
General guidance as of November 2026. Confirm current rates and charges with the lender, and see the RBI's website for the rules on loan pricing.
EMI for common loan amounts at 8.5%
| Loan | 15 years | 20 years | 25 years | 30 years |
|---|---|---|---|---|
| ₹20 lakh | ₹19,695 | ₹17,356 | ₹16,105 | ₹15,378 |
| ₹30 lakh | ₹29,542 | ₹26,035 | ₹24,157 | ₹23,067 |
| ₹40 lakh | ₹39,390 | ₹34,713 | ₹32,209 | ₹30,757 |
| ₹50 lakh | ₹49,237 | ₹43,391 | ₹40,261 | ₹38,446 |
| ₹75 lakh | ₹73,855 | ₹65,087 | ₹60,392 | ₹57,669 |
| ₹1 crore | ₹98,474 | ₹86,782 | ₹80,523 | ₹76,891 |
Lenders look at how much of your take-home pay would go to EMIs (they call it FOIR) and often stop at around half, so this table is also a quick check on how big a loan your salary supports. The salary calculator gives your in-hand pay.
Documents lenders usually ask for
Salaried
- Identity proof (Aadhaar, PAN or passport)
- Address proof (utility bill or rent agreement)
- Last 3 months' salary slips
- Last 6 months' bank statement
- Form 16 for the last 2 years
Self-employed
- Identity and address proof
- Business proof (GST or registration certificate)
- ITR for the last 3 years with the computation of income
- Last 12 months' bank statement
- Balance sheet and profit and loss statement, certified by a CA
These are estimates from the figures you enter. Your lender's sanction letter and amortisation schedule are what count, and tax rules depend on your full return. This page is for information, not financial or tax advice.