First-time buyers save the most by getting their CIBIL score to 750+, comparing at least three lenders (0.5% lower on a ₹50 lakh, 20-year loan saves about ₹3.8 lakh), paying 20% or more upfront and prepaying in the first five years. Floating-rate loans have no prepayment charges for individuals. Tax benefits on a self-occupied home (₹2 lakh interest, ₹1.5 lakh principal) apply only in the old tax regime.
Key Takeaways
- Keep your total EMIs within about 40–50% of take-home pay; that sets how much you can borrow.
- Banks lend at most 75–90% of the property value, so plan for the down payment plus about 10% for stamp duty, registration and fees.
- A 0.5% rate difference is worth lakhs over 20 years; compare lenders using the Key Fact Statement.
- ₹1 lakh prepaid in year 2 saves about four times as much interest as the same ₹1 lakh prepaid in year 15.
- In the new tax regime, a self-occupied home loan gives no tax deduction.
How much home loan can you get?
Two limits decide the amount: your income and the property's value.
Your income. Lenders want all your EMIs, including car and personal loans, to stay within about 40–50% of your take-home pay. On a ₹50,000 monthly take-home with no other loans, that is an EMI of ₹20,000–25,000, which at an assumed 8% for 20 years supports a loan of roughly ₹24–30 lakh. Clearing a small personal loan before you apply raises this. A working spouse as co-applicant adds their income too.
The property. RBI caps how much of the property value banks may lend (the loan-to-value ratio):
| Loan amount | Maximum loan as % of property value | Minimum you pay upfront |
|---|---|---|
| Up to ₹30 lakh | 90% | 10% |
| ₹30–75 lakh | 80% | 20% |
| Above ₹75 lakh | 75% | 25% |
Stamp duty and registration are usually not financed. In Tamil Nadu they add about 9% of the guideline value (7% stamp duty and 2% registration at the time of writing), so budget for that on top of the down payment.
Tip 1: Get your CIBIL score to 750+ before applying
Your credit score decides both approval and rate. Many banks offer their lowest rates only above about 750, and a score in the high 600s can mean a higher rate or a rejection. Download your free report, fix errors and bring card balances down a few months before you apply. Our guide on how to improve your CIBIL score walks through the steps.
Tip 2: Compare at least three lenders
Small rate differences add up over 20 years:
| Loan (20 years) | EMI at 8.0% | EMI at 8.5% | Extra interest at 8.5% |
|---|---|---|---|
| ₹30 lakh | ₹25,093 | ₹26,035 | About ₹2.3 lakh |
| ₹50 lakh | ₹41,822 | ₹43,391 | About ₹3.8 lakh |
Ask your salary-account bank, one or two public sector banks and one private bank or housing finance company. Every lender must now give you a Key Fact Statement before you sign, showing the annual percentage rate (APR) including fees, so compare APRs rather than headline rates. A sanction letter from one lender is useful when negotiating with another.
Tip 3: Choose floating or fixed with care
- Floating rate: most bank home loans are linked to an external benchmark, usually the RBI repo rate. When the repo rate falls, your rate falls at the next reset; when it rises, so does your rate. There is no prepayment or foreclosure charge for individual borrowers.
- Fixed rate: the rate is locked, often for a few years before it turns floating. It usually starts higher than the floating rate and may carry a prepayment charge.
Over a 20-year loan, rates go through several cycles, so most borrowers are better off floating. When rates are reset, lenders must tell you, and RBI rules let you ask to extend the tenure, increase the EMI or switch to a fixed rate. If rates have fallen but your lender's spread is high, ask for a lower spread or consider moving the loan.
Tip 4: Make a larger down payment
Every rupee you pay upfront is a rupee you do not pay interest on for 20 years. For a ₹50 lakh home at an assumed 8%:
| Down payment | Loan | EMI (20 years) | Total interest |
|---|---|---|---|
| 10% (₹5 lakh) | ₹45 lakh | ₹37,640 | ₹45.3 lakh |
| 20% (₹10 lakh) | ₹40 lakh | ₹33,458 | ₹40.3 lakh |
| 30% (₹15 lakh) | ₹35 lakh | ₹29,275 | ₹35.3 lakh |
Going from 10% to 20% down saves about ₹5 lakh of interest. Do not, however, empty your emergency fund for it; keep six months of expenses aside after paying the down payment and registration.
Tip 5: Prepay in the first five years
Early EMIs are mostly interest, so a prepayment early on cuts the most interest. For a ₹50 lakh, 20-year loan at an assumed 8%, keeping the EMI unchanged:
| ₹1 lakh prepaid in | Interest saved | Loan ends earlier by |
|---|---|---|
| Year 2 | About ₹3.6 lakh | 10 months |
| Year 5 | About ₹2.6 lakh | 8 months |
| Year 15 | About ₹0.9 lakh | 3 months |
When you prepay, ask the lender to reduce the tenure and keep the EMI the same; that saves more interest than lowering the EMI. Use bonuses and increments for prepayment, but balance it against investing: if you are in the old regime and claiming the interest deduction, or your rate is low, a long-term SIP may serve you better than prepaying everything. Try both on our EMI calculator.
Tip 6: Know which tax benefits you actually get
| Benefit | Old regime | New regime (default) |
|---|---|---|
| Interest on a self-occupied home | Up to ₹2 lakh a year | Not allowed |
| Principal repayment | Within the ₹1.5 lakh 80C limit | Not allowed |
| Stamp duty and registration | Within 80C, in the year paid | Not allowed |
| Interest on a let-out home | Allowed; loss set-off against salary capped at ₹2 lakh | Allowed against rent; no set-off against salary |
In the 30% slab, the ₹2 lakh interest deduction saves up to ₹62,400 a year including cess. The 80C benefit helps only if EPF, PPF or insurance have not already used up the ₹1.5 lakh limit. Run both regimes before deciding, using our new vs old regime guide. From April 2026 these deductions carry new section numbers under the Income-tax Act, 2025 (80C becomes Section 123), but the limits are unchanged. The old Section 80EEA deduction for first-time buyers is closed to new loans.
Families earning up to ₹9 lakh a year may also qualify for an interest subsidy under PMAY-Urban 2.0 on their first home; check eligibility with your lender before you sign.
Tip 7: Count every cost, not just the EMI
- Processing fee: typically 0.25–1% of the loan; often negotiable or waived in offers.
- Legal and technical charges: for checking the title and valuing the property.
- Stamp duty and registration: about 9% in Tamil Nadu, paid upfront.
- Insurance: lenders may offer loan-cover insurance. It is optional. A term plan in your own name is usually cheaper and also protects your family beyond the loan.
- Prepayment charges: none on floating-rate loans to individuals; check the terms on fixed-rate loans.
Documents to keep ready
- PAN, Aadhaar and address proof for every applicant
- Last three months' salary slips and six months' bank statements
- Form 16 (Form 130 from tax year 2026-27) or two years' ITRs if self-employed
- Sale agreement, title documents, approved plan and builder's approvals
- Details of existing loans and cards
Frequently Asked Questions
What CIBIL score is needed for a home loan in India?
Most banks look for 700 or more and offer their best rates from about 750. Below 650, approval is difficult without a strong co-applicant.
How much home loan can I get on a ₹50,000 salary?
With no other loans, roughly ₹24–30 lakh over 20 years at an assumed 8%, because lenders keep EMIs within about 40–50% of take-home pay. A co-applicant's income can raise this.
Should I choose a floating or fixed rate home loan?
For most borrowers, floating. It usually starts lower, falls when the repo rate falls and has no prepayment charges for individuals. A fixed rate suits you only if a stable EMI matters more than the likely cost.
Can I claim home loan tax benefits in the new tax regime?
Not for a self-occupied home. Interest and principal deductions are available only in the old regime. For a let-out home, interest is deductible against rent in both regimes.
Is there a penalty for prepaying a home loan?
Not on floating-rate loans taken by individuals. Fixed-rate loans may carry a prepayment charge, so check the sanction letter.
Is a shorter or longer tenure better?
A longer tenure gives a lower EMI but more interest: ₹30 lakh at 8% costs about ₹30.2 lakh in interest over 20 years and ₹39.5 lakh over 25. A common middle path is a longer tenure for safety, with regular prepayments.
Home loan guidance in Tiruppur
Hatlet Ventures helps first-time buyers in Tiruppur compare lenders, calculate EMI affordability and structure repayment alongside SIP savings.
Read next: How to improve your CIBIL score before you apply.
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Disclaimer: This article is for education only and is not investment, tax or legal advice. Figures and rules are stated as understood on the date shown and can change. Return figures are illustrative or historical, not guaranteed; past performance does not guarantee future results. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Insurance is the subject matter of solicitation. Hatlet Ventures is an AMFI-registered mutual fund distributor (ARN-345155), not a SEBI-registered investment adviser.
