Last updated: October 2026 Β· 3 min read
A home loan is usually the biggest loan most families take. Understanding how rates, eligibility and taxes work can save you lakhs over a 20-year loan.
How home loan interest rates work
Most new floating-rate home loans from banks are linked to an external benchmark, usually the RBI repo rate, plus a spread based on your profile. When the RBI changes the repo rate, your EMI or tenure changes. In October 2026 the RBI raised the repo rate by 0.25% to 5.50%, so floating-rate borrowers may see small increases.
Eligibility basics
- Age: typically 21-60/65 years at loan maturity.
- Income: lenders usually allow total EMIs up to about 50-60% of net monthly income.
- Credit score: 750+ gets the best rates.
- Loan-to-value (LTV): up to 90% for loans up to βΉ30 lakh, 80% for βΉ30-75 lakh, 75% above βΉ75 lakh (RBI norms).
- Co-applicant: adding an earning spouse increases eligibility.
Fixed vs floating rate
| Floating rate | Fixed rate | |
|---|---|---|
| Rate changes | Moves with benchmark | Fixed for a period (often 2-5 years) |
| Usually | Lower at start | Higher |
| Prepayment charges | None for individuals (RBI rule) | May apply |
| Best when | Rates may fall or stay stable | You want certainty |
Documents needed
- KYC: PAN, Aadhaar, address proof.
- Income: salary slips, Form 16, ITRs for 2-3 years, bank statements.
- Property: sale agreement, title deeds, approved plan, NOC from builder/society.
- For self-employed: business proof, audited financials.
Tax benefits (2026-27)
| Benefit | Old regime | New regime |
|---|---|---|
| Interest on self-occupied house | Up to βΉ2 lakh a year | Not allowed |
| Principal repayment | Within βΉ1.5 lakh under 80C | Not allowed |
| Interest on let-out property | Deductible against rental income | Deductible against rental income (loss cannot be set off against other income) |
Smart borrowing tips
- Compare the spread over repo across lenders.
- Prepay whenever you get a bonus; it cuts interest sharply.
- Prefer reducing tenure rather than EMI when prepaying.
- Consider a balance transfer if another lender offers a much lower rate.
- Check PMAY-U 2.0 interest subsidy if eligible.
Frequently asked questions
How much home loan can I get on a βΉ1 lakh salary?
Roughly βΉ50-70 lakh over 20 years, depending on existing EMIs, rate and lender policy.
Can I prepay a home loan without penalty?
Yes. RBI rules do not allow prepayment charges on floating-rate loans to individuals.
Is a joint home loan better?
It can increase eligibility, and in the old regime both co-owner borrowers can claim tax deductions separately.
Keep exploring
This article is for general information, not financial, tax or legal advice. Rates, limits and rules change; always confirm on the official website or with a qualified advisor before you act. Spotted something that needs updating? Let us know.
