When you dream of your own flat, the monthly instalment is the line that finally tells you if the dream fits your salary slip. Your Equated Monthly Instalment, or EMI, depends on seven moving parts. Understand each one, and you can shave thousands off the bill—and boost your home loan tax benefit at the same time. Keep an income tax calculator open while you read, so you can test every tip with your own numbers.
Factors that decide your home loan EMI
1. Loan amount
The lender funds up to 75–90% of your property value; you pay the rest as a down payment. A higher loan clearly lifts the EMI. Yet, stretching the loan can also enlarge your home loan tax benefit, because interest under Section 24(b) is deductible up to Rs. 2 lakh for a self-occupied house. Compare the savings on the income tax calculator with the extra interest outgo before locking the figure.
2. Interest rate
Floating-rate mortgages in India now track the repo. After the RBI’s 0.5 percentage-point cut in June 2025, fresh home loans from top lenders start at 7.90%. Even a 0.25% gap on Rs. 50 lakh over 20 years changes the EMI by about Rs. 800. Plug both rates into your income tax calculator; you will see how a lower rate not only trims the EMI but may also leave part of your Section 24(b) limit unused for other borrowings.
| Lender | Latest interest rate for new salaried borrowers* |
| Bajaj Housing Finance | Starts at 7.49% p.a. |
* Home loan interest rate as of June 2025
3. Tenure
Stretching the loan to 25 years can drop the EMI sharply, freeing cash for school fees. But total interest balloons. Tap the tenure slider on your lender’s income tax calculator; watch the interest column climb while the home loan tax benefit plateaus at Rs. 2 lakh a year. Many borrowers now choose a 20-year schedule and pre-pay small lumps when bonuses arrive, cutting tenure without straining monthly cash flow.
4. Credit score
Banks reward scores above 760 with the lowest spread over the repo, sometimes 20 basis points cheaper. That discount translates directly into a lower EMI. Check your score early; if it is low, repay credit card balances and correct report errors before you sign the agreement.
5. Interest rate type
A fixed loan keeps the EMI constant but starts 1–1.5% costlier than a floating rate. In today’s falling-rate cycle, floating wins for most borrowers, and the RBI bans foreclosure fees on such home loans. If you pick a hybrid plan—fixed for two years, floating after—note the reset month in your diary and re-run an income tax calculator then; you may want to switch to a pure repo-linked plan to maximise both savings and home loan tax benefit ceilings.
6. Charges you forget
Processing fees range from 0.25% to 1%. Add mortgage insurance or a one-time life cover, and the effective cost rises. Some lenders let you finance these fees inside the loan, but that bumps the EMI slightly. Enter all extras in the “other costs” box of your income tax calculator for a true picture. Remember, these fees do not add to the home loan tax benefit pool.
7. Prepayment habits
Every extra rupee you throw at the principal in the first five years saves plenty of interest later. Because the June repo cut lowers your rate, your EMI now contains a larger share of principal. If you pre-pay even Rs. 1 lakh a year, you shave months off the schedule. Note that principal prepayment does not affect the interest-based home loan tax benefit, but it can free up room under the Rs. 1.5 lakh 80C limit if the original EMI already covered that bracket. Verify with an income tax calculator before skipping an ELSS SIP.
Latest trends you should track
- Repo outlook – Research houses expect another 0.25% cut by December 2025, which will flow into floating EMIs within three months. Keep the lender’s own income tax calculator bookmarked; re-estimate your deduction each time the EMI changes.
- Digital sanctions – More banks now approve loans in 48 hours using video KYC. The sanction letter lists the exact rate, tenure, and provisional home loan tax benefit statement—handy for salaried employees who must declare investments early in the year.
- Green-home rebates – A few lenders knock 10 basis points off for IGBC-rated projects. The EMI difference feels small, but over 20 years, the savings and the matching cut in Section 24(b) interest claimed on the income tax calculator add up.
Steps to lock the best EMI
- Use a trusted income tax calculator to find your post-tax salary and current deductions.
- Decide the Section 24(b) and 80C headroom you still have for a fresh home loan tax benefit.
- Compare repo-linked offers from at least three lenders; focus on spread and not just headline rate.
- Choose a tenure that balances EMI comfort with total interest; confirm the impact in the calculator.
- Read the fee sheet and cross-check whether any cost also qualifies for a home loan tax benefit.
- Sign up for auto-debit and schedule one small pre-payment alert every bonus cycle.
Follow these six steps, and your EMI will fit your lifestyle today, your tax plan tomorrow, and your long-term wealth goals all at once.
No VCCircle journalist was involved in the creation/production of this content.
