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Home Loan in India

EMI breakdown, amortisation schedule, prepayment, balance transfer, and tax benefits — all in plain English. No jargon. No fine print.

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EMI Breakdown

EMI formula · Reducing balance · ₹50L example

How home loan EMI is split into principal and interest using the reducing-balance method — with a ₹50 lakh worked example at 8.5% p.a.

Principal vs Interest

Amortisation · Interest front-loading · Split shift

Why most of your early EMIs go to interest, and how the split shifts over time — the amortisation schedule explained.

Prepayment

Lump-sum · Higher EMI · Tenure reduction

How lump-sum prepayments and higher EMI payments reduce total interest and tenure — and when it makes the most sense to do so.

Balance Transfer

Rate switch · Processing fee · Break-even

Switching your home loan to another lender for a lower rate — processing fees, break-even calculation, and when it is worth doing.

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Frequently asked questions

How is home loan interest calculated in India?
Banks use the daily reducing balance method — the principal reduces with every EMI payment, and interest is charged on the outstanding amount each day. This means you pay less total interest than the monthly reducing method used by some lenders.

What tax benefits does a home loan give?
Under the Income Tax Act 2025, you can claim deduction on home loan interest up to ₹2 lakh per year under Section 24(b). The principal repayment (up to ₹1.5 lakh) qualifies under Section 80C. First-time buyers may also claim additional benefits under Section 80EE or 80EEA.

When does it make sense to prepay a home loan?
Prepayment is most valuable early in the tenure when the interest portion of your EMI is highest. A lump sum of ₹5 lakh in year 3 of a 20-year loan saves far more in interest than the same amount in year 15. Floating-rate loans carry no prepayment penalty.

What is a home loan balance transfer and should I do it?
A balance transfer moves your outstanding home loan to a new lender offering a lower interest rate. Processing fees are typically 0.5–1% of the outstanding amount. It is worth doing when the new rate is at least 0.75–1% lower and you have more than 5 years remaining.

Sources

Sources: Reserve Bank of India (RBI) home loan guidelines (rbi.org.in) · Income Tax Act 2025 Sections 24(b), 80C, 80EE, 80EEA · NHB (National Housing Bank) guidelines · Bank websites (SBI, HDFC, ICICI). Rates verified 2026-10-07. Last reviewed by FinWiz24 Research Desk.