How Home Loan Interest Rates Work In India: A Simple Explainer

Understanding how home loan interest rates work can help you compare offers and plan repayments better. Here are the basics.

Fixed vs floating rate: A fixed rate stays the same for the loan term (or a set period), giving predictable EMIs. A floating rate moves with the lender’s benchmark rate (commonly linked to the RBI’s repo rate in India), so your EMI or tenure can change when rates move.

Repo-linked lending rate (RLLR): Most Indian banks now link floating home loan rates to the RBI’s repo rate, meaning a repo rate change by the RBI typically passes through to borrowers’ rates fairly quickly, unlike older MCLR-linked loans.

EMI components: Each EMI includes both principal and interest; in the early years of a loan, a larger share goes toward interest, shifting toward principal over time.

What affects your rate: Credit score, loan-to-value ratio, loan tenure, and your relationship with the lender (existing customer offers) can all affect the rate offered to you.

This is general educational information, not personalised financial advice — compare current offers from multiple lenders before deciding.