Home Loan EMI: How Much Can You Really Afford? (With a Worked Example)

Your EMI is the single number that decides whether a home is comfortable or a strain. Here is how to work it out.

The formula

EMI = P × r × (1 + r)n / ((1 + r)n − 1), where P is the loan amount, r the monthly interest rate and n the number of months.

A worked example

Loan of ₹80 lakh at 8.65% for 20 years gives an EMI of about ₹70,000 per month. Total interest over the term is roughly ₹88 lakh — more than the loan itself. Stretching the tenure lowers the EMI but raises the interest paid; a 25-year tenure at the same rate drops the EMI to about ₹65,500 but adds nearly ₹17 lakh of interest.

The 40% rule

Banks typically cap total EMIs at 40–50% of net monthly income. A safer personal limit is 35%: if you take home ₹2 lakh a month, keep all EMIs under ₹70,000.

Ways to cut the cost

• Make a larger down payment — 25–30% instead of 20%.
• Prepay part of the principal each year; floating-rate loans carry no prepayment penalty for individuals.
• Opt for a subvention or construction-linked plan on under-construction homes so you pay EMI only on what is disbursed.

Use the EMI calculator on our home page to test your own numbers.