Home loan EMI: how much home can you afford?

3.1.1 What is a home loan EMI and how is it calculated?

A home loan EMI (equated monthly instalment) is the fixed payment you make each month until the loan is repaid. Each EMI pays the interest for that month first, and the rest reduces the principal. The standard formula is EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1). P is the loan amount and n is the number of monthly instalments. The monthly rate r is the annual rate divided by 12, then by 100. Take a ₹80 lakh loan at 8.5% a year for 20 years, which is 240 months. Here r is about 0.00708, and the EMI is about ₹69,426. In month 1, interest is about ₹56,667, so only about ₹12,759 reduces the principal. The interest share falls each month as the balance falls. The 8.5% rate is an illustration, not a current market rate. The lender’s quoted rate and its amortisation schedule give your real figures.

Over the full 240 months, this example repays about ₹1.67 crore. That is the ₹80 lakh principal plus about ₹86.6 lakh of interest. Sachi computed every number in this chapter with the formula above. Each EMI is rounded to the nearest rupee, and totals are that EMI times the number of months. A lender’s figures can differ slightly because of rounding, the date of the first EMI and broken-period interest.

3.1.2 How do you use a home loan EMI calculator step by step?

Start with the loan amount, not the price of the flat. The loan is the agreement value minus your own contribution. For commercial banks, Chapter VIII of RBI’s Credit Facilities Directions, 2025 caps the loan-to-value (LTV) ratio. The cap is 90% for loans up to ₹30 lakh and 80% above ₹30 lakh up to ₹75 lakh. Above ₹75 lakh, the cap is 75%. The same Directions tell banks not to count stamp duty, registration and other documentation charges in the property cost for LTV. The exception is a dwelling unit that costs ₹10 lakh or less. So for a loan above ₹30 lakh, you pay at least 20% or 25% of the cost from your own money. Stamp duty and registration come on top. Next, enter the lender’s quoted annual rate and the tenure in years. Then run the same loan at a higher rate to see your margin. The calculator above does the arithmetic.

1. Find the agreement value of the flat in the builder’s cost sheet.
2. Subtract your down payment to get the loan amount. Check it against the LTV cap for your loan size.
3. Enter the annual interest rate that the lender quotes to you, and note if it is floating or fixed.
4. Enter the tenure. Lenders set their own maximum tenure and age limits, so confirm them with the lender.
5. Read the EMI, then run the calculation again at a rate 1 percentage point higher.

Loan amount	Maximum LTV (RBI, banks)	Minimum own share of property cost
Up to ₹30 lakh	90%	10%
Above ₹30 lakh, up to ₹75 lakh	80%	20%
Above ₹75 lakh	75%	25%

Source: RBI (Commercial Banks - Credit Facilities) Directions, 2025, Chapter VIII, paragraphs 111 and 113, checked 10 October 2026. Sachi read the text updated as on 15 July 2026. The version updated as on 1 October 2026 is a PDF that Sachi could not open, so confirm the current limit with your lender. These Directions apply to commercial banks. Housing finance companies follow separate RBI Directions, so ask the lender for its LTV limit.

3.1.3 How do interest rate and tenure change your EMI and total interest?

A longer tenure lowers the EMI but raises the total interest, because the principal stays outstanding for longer. A higher rate raises both the EMI and the total interest. The table below uses one ₹80 lakh loan to show the size of these effects. At 8.5%, moving from 20 years to 30 years cuts the EMI by about ₹7,900 a month. But total interest rises from about ₹86.6 lakh to about ₹1.41 crore, an increase of about ₹54.8 lakh. Moving from 20 years to 15 years raises the EMI by about ₹9,350 a month. It cuts total interest to about ₹61.8 lakh. A rise of 1 percentage point, from 8.5% to 9.5%, raises the 20-year EMI by about ₹5,144. So compare total repayment, not only the EMI. All rates in this table are illustrations, not current market rates. Use the rate the lender quotes in your Key Facts Statement.

Scenario (₹80 lakh loan)	Monthly EMI	Total repaid	Total interest
8.5%, 15 years (180 months)	₹78,779	₹1,41,80,220	₹61,80,220
8.5%, 20 years (240 months)	₹69,426	₹1,66,62,240	₹86,62,240
8.5%, 30 years (360 months)	₹61,513	₹2,21,44,680	₹1,41,44,680
9.5%, 20 years (240 months)	₹74,570	₹1,78,96,800	₹98,96,800

Source: Sachi calculation with the standard EMI formula, 10 October 2026. Total repaid is the EMI, rounded to the nearest rupee, times the number of months. Rates are illustrative.

3.1.4 How much home loan EMI can your income support?

No RBI rule fixes the share of income that an EMI can take. Each lender decides eligibility under its own credit policy. A lender can approve a loan that is larger than your household can carry in comfort. So set your own limit before you visit projects. Start from take-home pay, not gross salary. Subtract every existing EMI and card payment. Then subtract running costs such as maintenance, property tax, utilities and insurance. Keep an emergency reserve outside the down payment. The amount left is the most you can pay as an EMI. Then test that EMI against two stresses. First, the floating rate rises by 1 percentage point. On the ₹80 lakh, 20-year example, the EMI goes from about ₹69,426 to about ₹74,570. Second, one income stops for some months. If the plan fails either test, choose a smaller loan, a larger down payment or a lower budget.

Plan the one-time costs separately. RBI tells banks not to count stamp duty, registration and documentation charges in the property cost for LTV. So plan to pay these costs from your own cash, on top of the down payment. See the flat cost sheet chapter for the full list of charges.

3.1.5 What happens to your EMI when a floating rate goes up?

When a floating rate rises, your lender can increase the EMI, extend the tenure, or do both. For commercial banks, the rules sit in paragraph 349 of the RBI (Commercial Banks - Responsible Business Conduct) Directions, 2025, issued on 28 November 2025. Housing finance companies apply the matching NBFC Directions, as the RBI (Housing Finance Companies) Directions, 2025 state. At a reset, the borrower “shall also be given the choice” of an enhanced EMI, a longer tenor, or a combination of both. The borrower can also prepay, in part or in full, at any point in the tenor. A switch to a fixed rate is optional for the lender. The bank “may, at its option” offer the switch under its Board-approved policy. A longer tenure must not cause negative amortisation. This means the EMI must still pay at least the interest due. The lender must tell you immediately about any increase in EMI or tenure.

At the end of each quarter, the lender must share a statement with you or make it accessible. At a minimum, it shows the principal and interest recovered so far, the EMI amount and the number of EMIs left. It also shows the annualised rate or APR for the full tenure. All charges for a switch from floating to fixed must be disclosed in the sanction letter.

On a 20-year, ₹80 lakh loan at 8.5%, a reset to 9.5% has two main paths. If you keep the EMI at ₹69,426, the remaining term grows from 240 to about 309 months. If you keep the tenure, the EMI rises to about ₹74,570. These are Sachi calculations that assume the reset happens before the first EMI.

Option at a rate reset	Required by the RBI circular?	What changes
Higher EMI	Yes, the borrower must be given the choice	Monthly outgo rises, tenure stays
Longer tenure	Yes, with no negative amortisation	EMI stays, more months and more interest
Combination of both	Yes	Both change
Prepay part or full	Yes, at any point in the tenor	Balance falls
Switch to fixed rate	No, at the lender’s option	Rate fixed, switch charges apply

Source: RBI (Commercial Banks - Responsible Business Conduct) Directions, 2025, paragraph 349, checked 10 October 2026. Sachi read the text issued on 28 November 2025. The version updated as on 1 October 2026 is a PDF that Sachi could not open.

3.1.6 Can you prepay a home loan without a penalty?

Yes, for floating-rate home loans to individuals. For commercial banks, paragraphs 352 and 353 of RBI’s Responsible Business Conduct Directions, 2025 set the rules. Take a floating-rate loan to an individual for a purpose other than business, sanctioned or renewed on or after 1 January 2026. Here the bank “shall not levy pre-payment charges”. This holds with or without a co-obligant, such as a co-applicant spouse. It applies to part or full prepayment, from any source of funds, with no minimum lock-in period. Older loans are also covered. For such floating-rate term loans sanctioned before 31 December 2025, a bank “shall not charge pre-payment charges”. For a loan that mixes fixed and floating rates, the rule depends on the rate type at the time of prepayment. For other loans, such as a fixed-rate loan, charges follow the bank’s approved policy. The bank must disclose them in the sanction letter, the loan agreement and the KFS.

Housing finance companies follow paragraph 163 of the RBI (Housing Finance Companies) Directions, 2025. An HFC cannot charge a pre-closure penalty on a floating-rate housing loan that you close from any source. On a fixed-rate housing loan, the bar applies only when you prepay from your own sources. A loan from another bank, HFC, NBFC or financial institution does not count as your own source. A bank also cannot levy, at prepayment, a fee that it waived earlier. Before you prepay, ask the lender in writing whether a part payment reduces the EMI or the tenure. A tenure cut usually saves more interest, but it keeps the EMI high.

3.1.7 How does a home loan work for an under-construction flat in Bangalore?

For an under-construction flat, the bank pays the builder in stages, not as one lump sum. RBI’s Credit Facilities Directions, 2025 say that disbursal to individuals “shall be closely linked to the stages of construction”. They also bar upfront disbursal for incomplete or under-construction projects. One exception covers projects sponsored by the government or a statutory authority with no past history of non-completion. There, banks may follow that authority’s payment stages. This affects your monthly outgo. A loan charges interest only on the amount disbursed so far. So in the early stages, your monthly payment can be small. As the builder raises demands, the disbursed amount and the interest grow. Sachi’s reading: many lenders offer interest-only payments during construction, often called pre-EMI. Others start the full EMI on the disbursed amount. Ask the lender which option applies, and what each costs in total interest.

Match each builder demand to the payment plan in the agreement for sale. The builder’s K-RERA registration lists the project and its documents. If construction falls behind, your own share of each demand still falls due when the builder raises it. Keep cash for the stages that the loan does not fund.

3.1.8 What should you check in the Key Facts Statement before you sign?

The Key Facts Statement (KFS) is the lender’s standard summary of your loan, and it binds the lender. RBI requires a KFS for new retail and MSME term loans sanctioned on or after 1 October 2024. For banks, paragraph 348 of the 2025 Responsible Business Conduct Directions holds this rule. RBI defines the Annual Percentage Rate (APR) as “the annual cost of credit to the borrower”. The APR includes the interest rate and all other charges that the lender levies. Third-party charges that the lender collects, such as insurance and legal fees, also count in the APR and appear separately. The KFS must include an APR computation sheet and the amortisation schedule for the whole tenure. The lender is bound by the KFS terms if you agree to them within the validity period. For loans of seven days or more, that period is at least three working days. Any fee not in the KFS cannot be charged without your explicit consent.

Use the KFS to check the calculator. The EMI in the amortisation schedule must be close to the EMI from the formula at the same rate and tenure. If it differs a lot, ask the lender to explain the difference in writing.

KFS item	What to check
Interest rate and type	Fixed, floating or hybrid; benchmark, spread and reset periodicity
EMI and number of EMIs	Matches your calculator result at the same rate and tenure
APR	Compare APR across lenders, not only the interest rate
Fees and charges	Processing, insurance, legal; nothing outside the KFS without your consent
Pre-payment charges	Nil for an individual’s non-business floating-rate loan; for other loans, the KFS must state them
Floating-to-fixed switch charges	Not nil by rule; the sanction letter must disclose all switch charges

Source: RBI (Commercial Banks - Responsible Business Conduct) Directions, 2025, paragraphs 348, 349 and 353, checked 10 October 2026.