How EMI is calculated
EMI = P × r × (1+r)n ÷ ((1+r)n − 1), where P is the loan, r the monthly interest rate and n the number of months. Early EMIs are mostly interest; the principal share grows over time.
Prepay early
Because interest is charged on the outstanding balance, prepayments in the first years save the most. Banks cannot charge a prepayment penalty on floating-rate loans taken by individuals.
Tax benefits on home loans
Under the old regime you can deduct up to ₹2 lakh of interest on a self-occupied home (section 24(b)) and principal under 80C within ₹1.5 lakh. The new regime does not allow these for a self-occupied house.
FAQ
What is the EMI for a ₹50 lakh home loan?
At 8.5% for 20 years the EMI is about ₹43,391, with total interest of roughly ₹54 lakh.
Is it better to reduce EMI or tenure when prepaying?
Reducing tenure saves more interest; reducing EMI improves monthly cash flow. This calculator shows the tenure-reduction effect.
Can I claim home-loan interest in the new regime?
Not for a self-occupied house. Interest on a let-out property can still be set off against its rental income.