Financing a home: how home loans really work

What you actually pay

A home loan is repaid in equated monthly instalments (EMIs). Early EMIs are mostly interest; later ones are mostly principal. The EMI simulator shows this split year by year so you can see how much of your money is interest.

Why we don't quote 'the' rate — repo-linked lending

Since 2019 most floating home-loan rates are externally benchmarked to the RBI repo rate: your rate = repo rate + the lender's spread (the RLLR / EBLR). When the RBI changes the repo rate, your rate resets. The spread depends on the lender, your loan-to-value, tenure, and credit score.

Because the rate is personal and moves with policy, MyStreetBiz never publishes an 'all-banks' rate table — that would be a fabricated number. Check the live policy rate at the RBI and each lender's published RLLR, then put your actual quoted rate into the calculators.

Fixed vs floating: fixed rates are higher but predictable; floating rates track the repo and are cheaper on average but variable. Most Indian home loans are floating.

Eligibility

• Income & FOIR: lenders cap total EMIs at roughly 40–50% of net income (a guideline, not a rule).
• Credit score: a higher CIBIL/credit score usually earns a lower spread.
• Loan-to-value: the RBI caps LTV by loan size (≤₹30L → 90%, ₹30–75L → 80%, above → 75%); the rest is your down payment.
• Documents: identity/address proof, income proof (salary slips / ITRs), bank statements, and the property papers.

Costs beyond the EMI

• Processing fee (often a small % of the loan).
• Stamp duty + registration on the sale — set per state.
• Mortgage/title creation charges (e.g. MODT) and, sometimes, loan-protection insurance.

Tax benefits (verify the current year & regime)

Under the old tax regime, a self-occupied borrower could deduct home-loan interest up to ₹2,00,000/year (Income-tax Act, Section 24(b)) and principal repayment up to ₹1,50,000/year within the Section 80C limit. Availability and limits differ between the old and new regimes and change in budgets.

Tax rules change year to year and depend on your chosen regime — confirm the current-year position with a CA before relying on any figure here.

Prepayment & balance transfer

For floating-rate home loans to individuals, the RBI does not permit prepayment/foreclosure penalties — you can prepay to cut interest. You can also transfer the balance to another lender for a better spread; weigh the new processing cost against the saving.