How home loans work in India
When you take a home loan from a bank like SBI, HDFC, or ICICI, you're borrowing a large amount and agreeing to pay it back in monthly instalments over 10–30 years.
The three things that determine your EMI:
- Principal (how much you borrow)
- Interest rate (currently 8%–9.5% for most banks)
- Tenure (how many years you take)
Why the first few years feel expensive
Here's something banks don't tell you clearly: in the early years of your loan, almost all of your EMI goes toward interest — not toward actually paying down your debt.
On a ₹30 lakh loan at 8.5% for 20 years, your first EMI might be ₹26,000. Of that, about ₹21,000 is interest and only ₹5,000 reduces the loan amount.
This is called amortisation (gradual repayment). By year 15, the split flips — most goes to principal.
PMAY benefit
If you're a first-time home buyer, check if you qualify for Pradhan Mantri Awas Yojana (PMAY). This gives a credit-linked interest subsidy that can save ₹2–2.67 lakh depending on your income bracket.
Should you go for a shorter tenure?
Shorter tenure = lower total interest, but higher EMI. Longer tenure = lower EMI, but much more total interest paid.
Example: ₹30 lakh at 8.5%
- 20 years: EMI ~₹26,000, total interest ~₹32 lakh
- 15 years: EMI ~₹30,000, total interest ~₹24 lakh
- 10 years: EMI ~₹37,000, total interest ~₹15 lakh
The 10-year option saves ₹17 lakh in interest but requires you to pay ₹11,000 more per month.
What to do next
Use the calculator above to find your EMI. Then check: is your total monthly EMI (all loans combined) less than 50% of your take-home salary? If yes, you're in a healthy range.