The bank approved your home loan for ₹85 lakh. That doesn't mean you should take ₹85 lakh. The amount a bank is willing to lend is based on their risk assessment — not on what creates a comfortable life for you over the next 20 years.
This guide explains how to calculate what EMI you can genuinely afford, how to choose between fixed and floating rates, and how smart prepayment can save you lakhs.
The EMI Formula
EMI (Equated Monthly Instalment) is calculated using the reducing balance method:
EMI = P × r × (1+r)ⁿ ÷ [(1+r)ⁿ − 1]
Where P = Principal loan amount, r = monthly interest rate (annual rate ÷ 12), n = loan tenure in months.
Quick EMI Reference Table — ₹10 Lakh Loan (2026 Rate Range)
| Interest Rate | 10 Years | 15 Years | 20 Years | 25 Years |
|---|---|---|---|---|
| 7.25% (SBI best rate) | ₹11,714 | ₹9,134 | ₹7,930 | ₹7,276 |
| 7.50% | ₹11,870 | ₹9,270 | ₹8,056 | ₹7,390 |
| 7.90% (HDFC entry) | ₹12,047 | ₹9,425 | ₹8,232 | ₹7,578 |
| 8.25% | ₹12,249 | ₹9,643 | ₹8,479 | ₹7,836 |
| 8.75% | ₹12,502 | ₹9,960 | ₹8,793 | ₹8,178 |
| 9.50% (weaker profile) | ₹12,940 | ₹10,442 | ₹9,321 | ₹8,737 |
As of June 2026. Rates are indicative — your actual rate depends on credit score, income, loan-to-value ratio, and lender. Rates linked to RBI repo rate and subject to periodic resets.
To find your EMI: multiply the table value by (Your Loan Amount ÷ 10,00,000). So for a ₹75 lakh loan at 9% for 20 years: ₹8,997 × 75 = ₹6,74,775 per year = ₹67,477/month.
The 40% Rule: What You Can Afford
A widely used rule in personal finance is that your total EMI obligations should not exceed 40% of your net monthly income (take-home pay after tax). This leaves enough for living expenses, savings, and emergencies.
Affordability check: If your net monthly income is ₹1.5 lakh, your maximum total EMI commitment should be ₹60,000. If you already have a car loan EMI of ₹15,000, your home loan EMI budget is ₹45,000. At 9% for 20 years, that supports a loan of about ₹50 lakh.
Some financial planners recommend being more conservative — keeping housing EMI at 30% or less — to maintain financial flexibility, especially during career transitions, health emergencies, or rate hikes.
Before committing to an EMI this size, it's worth running the numbers the other way too. Our rent vs buy calculator for India compares what you'd actually keep over time if you invested your down payment instead of buying — the answer isn't always as obvious as it feels.
Fixed vs Floating Interest Rates
Floating Rate (RLLR/EBLR linked)
Most home loans in India today are on floating rates linked to an external benchmark — usually the RBI Repo Rate via the bank's External Benchmark Linked Lending Rate (EBLR) or Repo-Linked Lending Rate (RLLR). When the RBI raises or cuts rates, your loan rate changes accordingly within months.
Current floating rates (June 2026) from major lenders: SBI from 7.25%, ICICI Bank from 7.45%, HDFC Bank from 7.90%, Axis Bank from 8.10%, Kotak from 7.70%. Public sector banks lead with the lowest entry rates, starting around 7.10–7.25% for borrowers with strong credit profiles (750+ CIBIL).
Fixed Rate
Fixed rates are locked for a specified period (typically 2–5 years) and are usually 1–2% higher than current floating rates. They offer predictability but mean you miss out if rates fall.
| Floating | Fixed | |
|---|---|---|
| Current rate | Lower | Higher by 1–2% |
| Rate risk | Moves with RBI policy | Protected for fixed period |
| Best for | Long tenures, falling rate environment | Short tenures, rising rate environment |
| Prepayment charges | Nil (for individuals) | May have charges |
In the current Indian environment, most financial advisors suggest floating rates for home loans, given that India's rate cycle is difficult to predict over a 20-year horizon and floating rates have historically trended lower over long periods.
How Much Interest Do You Actually Pay?
This is the number that surprises most first-time borrowers. On a ₹75 lakh loan at 9% for 20 years:
- Total EMI payments: ₹67,477 × 240 months = ₹1,61,94,480
- Principal: ₹75,00,000
- Total interest paid: ₹86,94,480 — more than the principal itself
This is why prepayment is so powerful.
Prepayment Strategy: Save Lakhs
Every rupee you prepay reduces the principal on which future interest is charged. The impact is highest in the early years of the loan when the outstanding principal is large.
Annual Lump Sum Prepayment
If you prepay ₹1 lakh every year starting from Year 1 on the ₹75 lakh loan above:
- Loan closes approximately 6 years early (in Year 14 instead of Year 20)
- Interest saving: approximately ₹22–28 lakh
- Total prepayment made: ₹14 lakh
This is an extremely high return on that ₹14 lakh — effectively a guaranteed 9% post-tax return.
Current Lender Rate Snapshot (June 2026)
| Lender | Starting Rate | Notes |
|---|---|---|
| SBI | 7.25% | Linked to repo rate; best for salaried with 750+ CIBIL |
| Bank of India / Bank of Maharashtra | 7.10% | Lowest entry rates in market |
| PNB | 7.20% | Competitive for loans above ₹30L |
| Kotak Mahindra Bank | 7.70% | Fast processing; good for self-employed |
| ICICI Bank | 7.45% | Pre-approved offers for existing customers |
| HDFC Bank | 7.90% | Largest private sector lender; wide branch network |
| Axis Bank | 8.10% | Flexible prepayment; good for NRIs |
Rates effective June 2026. Final rate offered depends on CIBIL score, income, and employer category. Always compare processing fees and foreclosure charges alongside the interest rate.
Documents Required for a Home Loan
- Identity proof (Aadhaar, PAN)
- Address proof
- 3–6 months salary slips (salaried) or 2 years ITR (self-employed)
- 6 months bank statements
- Property documents (sale agreement, approved plan, RERA registration)
- Employment letter / appointment letter
Processing Fees and Hidden Loan Costs
Beyond the interest rate, lenders charge:
- Processing fee: 0.25–1% of loan amount, typically non-refundable
- Valuation fee: ₹2,500–10,000
- Legal / technical fee: ₹5,000–15,000
- MODT stamp duty: 0.1–0.2% of loan amount in most states
- Insurance: Lenders often push home loan protection insurance — this is optional, not mandatory
Key Takeaways
- Keep total EMIs below 40% of net income, housing EMI ideally below 30%
- The bank-approved amount is a ceiling, not a recommendation
- Floating rates are generally better for long tenures
- Even small annual prepayments save disproportionately large amounts in interest
- Factor processing fees and MODT into your total borrowing cost