Complete Guide to Home Loans in India
Understanding interest rates, LTV limits, processing fees, and tax optimization.
1. The Reducing Balance Formula
Unlike flat-rate schemes, Indian housing loans operate on a monthly reducing balance method. With each monthly installment, interest is assessed exclusively against your remaining outstanding principal. As your principal diminishes, the monthly interest portion shrinks, accelerating your equity build-up.
EMI = [P × r × (1 + r)^n] / [(1 + r)^n - 1]
2. RBI Loan-to-Value (LTV) Framework
| Property Valuation | Max Permissible LTV | Min Down Payment |
|---|---|---|
| Up to ₹30 Lakhs | 90% | 10% |
| ₹30 Lakhs to ₹75 Lakhs | 80% | 20% |
| Above ₹75 Lakhs | 75% | 25% |
3. Tax Deductions (Section 80C vs Section 24b)
Borrowers choosing the Old Tax Regime can substantially lower their annual tax liability through dual provisions under the Income Tax Act:
- Principal Repayment (Sec 80C): Up to ₹1,50,000 deduction per fiscal year (shared with PF, ELSS, PPF).
- Interest Payment (Sec 24b): Up to ₹2,00,000 deduction per fiscal year for self-occupied homes.