A home loan is a secured loan provided by banks, housing finance companies, and NBFCs to help individuals buy, construct, or renovate a home. The loan amount is disbursed against the property as collateral and is repaid in equated monthly installments (EMIs) over a fixed tenure. Once fully repaid, the property’s ownership is transferred back to the borrower. Home loans come in different types, including fixed-rate, floating-rate, and hybrid loans, catering to various financial needs.
What is home loan?
A home loan, also known as a housing loan, is a secured loan that helps individuals purchase, construct, or renovate a residential property. Offered by banks, housing finance companies, and NBFCs, it provides high-value funding while using the property itself as collateral. Borrowers repay the loan in equated monthly instalments (EMIs) over a fixed tenure, making homeownership more accessible. Depending on financial needs, one can choose from various types of home loans, such as fixed-rate, floating-rate, and hybrid home loans.
What are the types of home loans available in India?
India offers various types of home loans to cater to different financial needs, making it easier for buyers to fund their property purchases. From loans for buying a new home to those for construction, renovation, or balance transfer, borrowers can choose the best option based on their requirements. Understanding home loan types helps in selecting the right financing solution, ensuring affordability and convenience. Here’s an overview of the types of loan in India available for homebuyers.
Home loan types in India
Home loan
It is the most popular home loan used to buy a property. Housing loans are available from a variety of housing financing firms, public banks, and private banks. You may borrow money to buy the home of your choosing and return the loan over time in monthly instalments. You can obtain financing for between 80 and 90 percent of the market price of the home. The residence will be kept by the lender until the loan is fully repaid.
Home construction loan
If you already own a piece of land and need money to build a house on it, this form of mortgage is what you need.
Home extension loan
Let’s say you currently own a home and would like to add a room or a floor to it to suit your expanding family. Loans for home extensions might be used to finance this.
Home improvement loan
If there is a problem with the existing system, a home improvement loan can be used to finance renovations or repairs including painting the inside or outside of the house, improving the plumbing, upgrading the electrical system, waterproofing the ceiling, and more.
Land purchase loan / Plot loan
Designed for individuals looking to purchase a plot of land for residential construction or investment purposes. These loans typically cover up to 80-90% of the land’s market value.
NRI home loan
Tailored for Non-Resident Indians (NRIs) who wish to buy residential property in India. The application process and documentation requirements differ from standard housing finance, often necessitating proof of overseas residency and a power of attorney.
Home loan balance transfer
Allows existing home loan borrowers to transfer their outstanding loan balance to another lender offering more favourable interest rates or terms. This option can lead to significant savings over the loan tenure.
Top-up home loan
Available to individuals with an existing home loan who require additional funds for purposes like renovations, education, or other personal expenses. Top-up loans generally come with competitive interest rates and flexible repayment options.
Joint home loan
Offered to multiple borrowers, such as spouses or family members, allowing them to own a property and share the repayment responsibilities jointly. This arrangement can enhance loan eligibility and may provide tax benefits.
Pre-approved home loans before property selection
Homebuyers can apply for a pre-approved home loan even before finalizing a property. A pre-approved loan is sanctioned based on the borrower’s income, credit score, and repayment capacity, without needing immediate property details. It gives a clear idea of how much loan one can avail, helping in setting a realistic budget while searching for a home.
Pre-approvals are usually valid for a limited period, typically up to 3 or 6 months, and come with a conditional sanction letter from the lender. Once the property is selected, the borrower can submit the details for further legal and technical verification before final disbursal.
Getting a pre-approved loan can strengthen a buyer’s negotiating power with sellers and also ensures faster processing once the property is shortlisted.
Eligibility criteria for home loans
Banks maintain a list of requirements for home loan qualifying. A person’s credit history is the first thing a bank looks at to determine their repayment tendencies. A credit score of 750 or above is often preferable. The following are some more crucial considerations:
- Age type of employment
- Requirements for the minimum annual salary collateral security margin
- Assets, liabilities, occupational stability and continuity
- (Resident Indian/Non-resident Indian) status of residency
When applying for a home loan in India, lenders assess various factors to determine an applicant’s eligibility. Key criteria include:
- Age: Salaried individuals should be between 21 and 65 years, while self-employed applicants are typically eligible up to 70 years.
- Income: A stable monthly income is crucial. For instance, a minimum net monthly salary of ₹25,000 is often required.
- Employment stability: Salaried applicants should have at least 3 years of work experience, and self-employed individuals should demonstrate a business vintage of at least 5 years.
- Credit Score: A credit score of 750 or above is generally preferred, indicating good creditworthiness.
- Existing financial obligations: Lenders evaluate current debts to ensure the applicant can manage additional loan repayments.
- Property details: The property’s value, age, and location are assessed, as it serves as collateral for the loan.
CIBIL score: A key factor in determining home loan eligibility
A CIBIL score is a three-digit number ranging from 300 to 900 that reflects an individual’s creditworthiness based on their credit history and repayment behaviour. India’s lenders rely heavily on this score to assess home loan applications, as it indicates the risk associated with lending to a borrower.
What is a good CIBIL score for a home loan?
A CIBIL score of 750 or above is generally considered excellent and significantly enhances the likelihood of home loan approval. Such a score demonstrates responsible credit behavior and assures lenders of the applicant’s ability to manage and repay credit effectively.
What is the best CIBIL score for a home loan?
While a score above 750 is deemed excellent, achieving a score closer to 900 positions an applicant in the most favorable light. Higher scores not only increase the chances of loan approval but also provide leverage to negotiate better interest rates and loan terms.
What is the minimum CIBIL score for a home loan?
The minimum CIBIL score required for a home loan varies among lenders. Typically, a score of 650 to 750 is considered optimal for loan eligibility. Applicants with scores below this range may face challenges in securing a loan or might be offered loans with higher interest rates and stricter terms.
Impact of CIBIL score on home loan eligibility
A higher CIBIL score not only facilitates loan approval but also influences the loan amount, interest rate, and repayment tenure offered by the lender. Conversely, a lower score may lead to loan rejection or less favorable terms. Therefore, maintaining a good credit score is crucial for prospective homebuyers.
Loan-to-value ratio and down payment requirement
When applying for a home loan, it’s important to understand that lenders do not finance the entire value of the property. Most banks and housing finance companies in India provide funding for 75% to 90% of the property’s market value. This is known as the loan-to-value (LTV) ratio. The remaining amount, referred to as the down payment or margin money, must be paid upfront by the borrower from their own funds.
For example, if the property value is ₹50 lakh, and the bank agrees to finance 80% of it, the borrower will receive a loan of ₹40 lakh. The remaining ₹10 lakh must be arranged by the borrower before loan disbursal.
The exact LTV ratio depends on several factors such as the loan amount, the borrower’s profile, and regulatory guidelines. Typically:
- For loans up to ₹30 lakh, LTV can go up to 90%
- For loans between ₹30 lakh and ₹75 lakh, LTV is capped at 80%
- For loans above ₹75 lakh, LTV is limited to 75%
Home loan EMI calculator
Understanding your monthly payments is essential when planning for a home loan. The Housing.com Home Loan EMI Calculator is a simple tool that helps you figure out your Equated Monthly Installments (EMIs).
Key features of Housing.com home loan EMI calculator
- Easy inputs: Enter your loan amount, interest rate, and loan tenure to see your EMI instantly.
- Detailed breakdown: View a clear schedule showing how much you’ll pay towards the principal and interest each month.
- Pre-payment analysis: See how making extra payments can reduce your loan duration and save on interest.
How to use the Housing.com home loan EMI calculator
- Input loan details: Type in the loan amount you need, choose the number of years for repayment, and set the interest rate.
- See EMI results: The calculator will show your monthly EMI, total interest payable, and any processing fees.
- Review payment schedule: Check the year-by-year breakdown to understand your repayment plan better.
How to calculate home loan EMI?
Consider Mr. Sharma, who wishes to purchase a house and is evaluating his loan options.
- Principal Loan Amount (P): ₹50,00,000
- Annual Interest Rate (R): 8.5%
- Loan Tenure (N): 20 years (240 months)
First, convert the annual interest rate to a monthly rate:
r = 8.5 ÷ (12 × 100) = 0.00708
Applying the values to the EMI formula:
EMI = [50,00,000 × 0.00708 × (1 + 0.00708)²⁴⁰] ÷ [(1 + 0.00708)²⁴⁰ – 1]
Calculating this yields an EMI of approximately ₹43,379.
Over the loan tenure, Mr. Sharma’s total repayment amount would be:
₹43,379 × 240 = ₹1,04,10,960
Here, the interest component amounts to:
₹1,04,10,960 − ₹50,00,000 = ₹54,10,960
How to calculate home loan EMI using excel?
Calculating EMI follows a straightforward formula:
Source: https://in.pinterest.com/pin/1037939045371021274
Where:
- P = Principal loan amount
- R = Annual interest rate (in decimal form)
- N = Loan tenure in months
If you prefer not to calculate EMI manually or use an online EMI calculator, you can use Excel, which provides a simple and efficient method.
How to calculate EMI in excel
In an Excel sheet, use the PMT function to calculate EMI:
= PMT(RATE,NPER,PV,FV,TYPE)
Where:
- RATE = Interest rate per month (Annual interest rate/12)
- NPER = Total number of EMIs (Loan tenure in months)
- PV = Loan amount (Principal)
- FV (optional) = Future value after the last payment (default is 0)
- TYPE = 0 (payment due at the end of the month) or 1 (payment due at the start)
Example calculation
To calculate the EMI for a personal loan of ₹5,00,000 at 12% annual interest for 36 months, follow these steps:
- Enter the loan amount (₹500,000) in one cell (e.g., B1).
- Enter the annual interest rate (12%) in another cell (B2).
- Enter the loan tenure (36 months) in a third cell (B3).
- In the desired cell, type the formula:
=PMT(B2/12, B3, -B1)
- B2/12 converts the annual interest rate to a monthly rate.
- B3 represents the loan tenure in months.
- B1 is the loan amount (negative sign denotes an outgoing payment).
- Press Enter, and Excel will compute the EMI instantly.
How to get a home loan? Apply for home loan in India
Your chances of securing a housing loan depend majorly on whether your financial situation matches the home loan requirements of the bank. You can get all the home loan information details for your preferred bank on their official website or by visiting your nearest branch. It is highly suggested to understand how does home loan work to be able to successfully apply for home loan in India.
Assess your financial readiness: Evaluate your income, existing liabilities, and credit score to determine your loan eligibility. A good credit score enhances approval chances.
Research and compare lenders: Explore various banks and financial institutions to compare interest rates, loan tenures, processing fees, and other terms.
Prepare necessary documentation: Gather essential documents such as identity proof, address proof, income statements, employment details, and property-related papers.
Submit the loan application: Fill out the lender’s application form accurately and attach all required documents. Ensure all information is correct to avoid delays.
Pay processing fees: Upon application submission, pay the non-refundable processing fee as specified by the lender. This fee covers administrative expenses.
Participate in discussions with the lender: Be available for any discussions or interviews the lender may request to verify details and assess repayment capacity.
Await verification and approval: The lender will verify your documents and evaluate your creditworthiness. If satisfied, they will issue a sanction letter detailing the loan amount, interest rate, and terms.
Property verification and legal check: The lender will conduct a legal and technical evaluation of the property to ensure it meets all regulatory requirements and is free from disputes.
Sign the loan agreement: Review the loan agreement carefully, clarify any doubts, and sign it to proceed.
Disbursement of loan amount: After completing all formalities, the lender will disburse the loan amount, typically directly to the seller or builder’s account.
Current home loan interest rates 2025 – Public and private banks
As of February 2025, the average home loan interest rate in India ranges from 8.35% to 14.50%, depending on the lender, loan amount, applicant’s credit profile, and economic conditions. The RBI’s repo rate, steady at 6.5% since February 2023, plays a key role in influencing housing loans along with inflation and market trends.
For those wondering how to get a home loan, many banks offer concessional rates. Women borrowers often receive lower interest rates to encourage homeownership, while senior citizens may have customized loan options.
Home loans can have fixed or floating interest rates. Fixed-rate loans keep EMIs predictable, while floating-rate loans, linked to benchmarks like the RBI repo rate, fluctuate with market conditions, impacting monthly payments.
To secure the best housing loan, compare current bank offers and use online EMI calculators to estimate payments. Below is a comparison of the average home loan interest rate in India from leading banks as of February 2025:
Home loan interest rates of popular Indian banks
Public Sector Banks
| Bank Name | Interest Rate Range (p.a.) |
| State Bank of India | 8.50% – 9.85% |
| Bank of Baroda | 8.40% – 10.90% |
| Union Bank of India | 8.30% – 10.90% |
| Punjab National Bank | 8.40% – 10.15% |
| Bank of India | 8.35% – 11.10% |
| Canara Bank | 8.40% – 11.15% |
| UCO Bank | 8.45% – 10.30% |
| Bank of Maharashtra | 8.35% – 11.15% |
| Indian Overseas Bank | 8.40% – 10.60% |
Private Sector Banks
| Bank Name | Interest Rate Range (p.a.) |
| Kotak Mahindra Bank | 8.75% onwards |
| ICICI Bank | 8.75% onwards |
| Axis Bank | 8.75% – 9.65% |
| South Indian Bank | 8.70% – 11.70% |
| Karur Vysya Bank | 9.00% – 11.05% |
| Karnataka Bank | 8.75% – 10.87% |
| Federal Bank | 8.80% onwards |
| Dhanlaxmi Bank | 9.35% – 10.50% |
| Tamilnad Mercantile Bank | 8.60% – 9.95% |
| Bandhan Bank | 9.16% – 13.33% |
| RBL Bank | 9.00% onwards |
Purpose of home loan
The purpose of a home loan is to provide financial assistance to individuals for purchasing, constructing, or renovating a residential property. Since real estate is a high-value investment, a home loan allows buyers to afford a property without making a large upfront payment. A home loan can be taken in the following types:
What is EMI for home loan
EMI (Equated Monthly Installment) for a home loan is the fixed amount a borrower pays every month to repay the loan, covering both principal and interest. It is calculated based on the loan amount, interest rate, and tenure, ensuring structured repayment over time. Lower interest rates or longer tenure can reduce EMI amounts.
What is home loan interest rate?
The home loan interest rate is the percentage charged by a lender on the loan amount, determining the cost of borrowing. It can be fixed (constant throughout the tenure) or floating (varies based on market conditions). Interest rates depend on factors like the borrower’s credit score, loan tenure, and lender policies.
Transfer of home loan balance
You can transfer the remaining amount of the house loan to a new lender who provides a lower interest rate and better service if the present interest rate on loan is too high for you or you are dissatisfied with the service provided by your current lender. You can even investigate the potential for a top-up loan on your current one after the move.
Loan prepayment and foreclosure: Rules, charges, and tips
Repaying your home loan early—whether through lump-sum prepayment or full foreclosure—can save you significant interest. However, rules and charges vary:
- Floating-rate home loans: As per RBI guidelines, banks and NBFCs are not allowed to levy prepayment or foreclosure charges on individual borrowers for floating-rate home loans. This means you can make part-payments or close your loan early at no extra cost.
- Fixed-rate home loans: Banks may charge a penalty (usually 2–3% of the outstanding amount) for early repayment or foreclosure, especially if you are using funds from another financial institution. Some lenders waive charges if you repay from your own savings—always check your agreement.
- Part-prepayment: You can pay extra towards your principal in most home loans. Some lenders set a minimum amount or limit the number of part-payments per year.
- Full foreclosure: If you want to close your loan before the tenure ends, ask for a foreclosure statement from the bank. Ensure all dues are cleared and collect a No Dues certificate and original property documents.
Tips to improve your CIBIL score
- Timely repayments: Ensure all loan EMIs and credit card bills are paid on time to build a positive credit history.
- Credit utilization: Keep credit utilization below 30% of the available limit to demonstrate prudent credit management.
- Limit credit Inquiries: Avoid multiple loan or credit card applications in a short period, as it can negatively impact the score.
- Monitor credit reports: Regularly check credit reports for inaccuracies and get them rectified promptly.
What is a mod in a home loan?
MOD (Memorandum of Deposit of Title Deed) in a home loan is a legal document executed when a borrower pledges property documents to the lender as collateral. It confirms that the property is mortgaged and secures the loan. Some states charge a MOD fee or stamp duty for its registration.
Benefits of obtaining a home loan
- The provision to deduct interest and principal payments from your income tax is the main advantage of having a mortgage. You are permitted to deduct up to Rs. 1.5 lakh for principal repayments under Section 80C, Rs. 2 lakh for interest repayments under Section 24B, Rs. 2 lakh for interest repayment under special circumstances under Sections 80EE and 80EEA, and Rs. 1.5 lakh for stamp duty expenditures under Section 80C.
- Compared other loan options, the interest rate on a house loan is significantly cheaper. If you run into financial trouble, you might be able to extend your current house loan at a more affordable interest rate than a personal loan to get by.
- When you buy a house through a bank, the bank will thoroughly investigate the property from a legal standpoint and determine whether all the paperwork presented is legitimate. You will be less likely to be scammed due to the bank’s diligence assessment. You and your home are protected if the bank authorises the property.
- Home loans have a longer payback period than any other type of loan, up to 25 to 30 years. This is because borrowing a sizable loan amount is required to buy a property. The monthly EMIs will be lower if the loan amount and related interest are spread out over a longer term, easing the strain on the borrower.
- When you take up a floating-rate mortgage, you can pay off the loan early anytime you have a lump sum available without incurring any prepayment penalties. This will enable you to pay off your mortgage much before the agreed-upon loan term.
- For various factors, including the interest rate, service fees, level of customer care, and others, you can switch your house loan from one lender to another.
Home loans for the self-employed in India
Securing a home loan as a self-employed individual in India is feasible, with many financial institutions offering tailored solutions to meet the unique needs of non-salaried professionals. Lenders such as HDFC Bank and ICICI Home Finance provide home loans specifically designed for self-employed individuals, including professionals like doctors and lawyers, as well as non-professionals like traders and small business owners.
Interest rates for self-employed individuals generally start from around 8.35% per annum, with loan tenures extending up to 20 years. The exact rate and loan amount depend on factors such as income stability, credit score, and the lender’s policies.
What is the minimum salary for home loan?
The minimum salary required to qualify for a home loan in India varies among lenders and depends on several factors, including the loan amount, applicant’s credit score, and existing financial obligations. Generally, lenders prefer applicants to have a stable monthly income, with specific requirements differing by institution. For instance:
- HDFC: Requires a minimum salary of ₹10,000 per month.
- ICICI Bank: Prefers a minimum monthly salary of around ₹25,000.
- IDFC FIRST Bank: Sets the minimum annual salary at ₹1 lakh for salaried individuals.
What is the minimum home loan amounts offered by Indian banks?
In India, the minimum home loan amount varies across banks and financial institutions, typically starting from ₹1 lakh. For instance, Bajaj Finserv offers home loans beginning at ₹4 lakh. State Bank of India (SBI) does not specify a fixed minimum loan amount, assessing applications based on individual eligibility and requirements. It’s advisable to consult directly with the respective bank or lender to understand their specific minimum loan amount criteria and terms.
What is the minimum tenure for home loan?
The minimum tenure for a home loan in India varies among lenders but typically ranges from 2 to 5 years. Opting for a shorter tenure results in higher monthly EMIs but reduces the total interest paid over the loan’s duration. This approach enables borrowers to become debt-free more quickly.
What is the minimum EMI for home loan?
The minimum Equated Monthly Installment (EMI) for a home loan in India is influenced by factors such as the loan amount, interest rate, and tenure. For instance, HDFC Bank offers home loans with EMIs starting from ₹787 per lakh, based on specific loan parameters.
Similarly, Axis Bank provides home loans with a minimum loan amount of ₹3 lakh, which would result in an EMI determined by the applicable interest rate and chosen tenure.
To determine the exact EMI for a specific loan amount and tenure, it’s advisable to use the EMI calculators available on the respective bank’s website.
Borrower rights & legal recourse: SARFAESI Act explained
Many borrowers are unaware of the legal framework that comes into play if they default on their home loan. The SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) empowers banks and housing finance companies to seize and auction your property without court intervention if you repeatedly miss payments.
How does the process work?
- The bank must issue a legal notice to the borrower, giving at least 60 days to clear the outstanding dues.
- If the dues are not paid within this period, the bank can take physical possession of the property and publish auction details in newspapers.
- The entire process must be transparent and follow due process.
What rights do borrowers have?
- You can object to the bank’s action within the 60-day notice window.
- If you believe the bank is acting unfairly or has not followed the correct procedure, you can file an appeal with the Debt Recovery Tribunal (DRT) within 45 days of possession notice.
- The bank cannot sell the property for less than the fair market value and must refund any surplus after settling dues.
Home loan subsidies & government schemes (PMAY)
First-time homebuyers in India can lower their effective home loan rate using the Pradhan Mantri Awas Yojana (PMAY) subsidy under the Credit Linked Subsidy Scheme (CLSS). PMAY provides an upfront interest subsidy on the principal, which reduces EMIs for eligible borrowers.
Who is eligible?
- You must not own a pucca house in your name or your family’s name anywhere in India.
- The property must be in an urban area covered by PMAY.
- Income eligibility (annual household income):
- EWS (up to ₹3 lakh), LIG (₹3–6 lakh): up to 6.5% interest subsidy on a loan up to ₹6 lakh.
- MIG I (₹6–12 lakh): 4% subsidy on a loan up to ₹9 lakh.
- MIG II (₹12–18 lakh): 3% subsidy on a loan up to ₹12 lakh.
- The home must be the family’s first house, and female ownership/co-ownership is mandatory in most cases for EWS/LIG.
How to apply for PMAY subsidy:
- Apply for a home loan from a participating bank or housing finance company.
- Declare PMAY eligibility and provide required income and family details.
- The lender will process and forward your subsidy application to the National Housing Bank (NHB) or HUDCO.
- Once approved, the subsidy is credited directly to your loan account, reducing your outstanding principal.
Housing.com POV
A home loan is more than just a financial commitment—it’s a strategic decision that shapes your future. While eligibility criteria, interest rates, and EMIs are essential, factors like your CIBIL score, tenure, and financial stability are crucial in securing the best deal. Choosing the right lender, maintaining financial discipline, and understanding loan terms deeply will ensure that your home loan becomes a stepping stone toward wealth creation rather than a burden. A well-planned approach can make homeownership a rewarding experience.
FAQs
What is EMI?
The term EMI stands for Equated Monthly Instalment, which is the sum you must pay to us on a particular date each month until the loan is fully repaid. The principal and interest components of the EMI are constructed so that in the early years of your loan, the interest component will be considerably bigger than the principal component, while the principal component will be much larger in the latter half of the loan.
How long does a mortgage loan last?
With a minimum duration of 5 years and a maximum tenure of 30 years, home loans are long-term financial products. The length of your personal loan is determined by a number of factors, including the loan amount that the lender has approved for you.
What are the requirements for a home loan?
Anyone with a consistent source of income, including self-employed people and professionals who are salaried, is eligible to qualify for a house loan. When the loan period starts, the borrower must be at least 21 years old, and at the end of the loan or when they reach retirement age, they cannot be older than 65. The particular requirements, such as the minimum and maximum age restrictions, the minimum income level, etc., may vary from one lender to another.