Home loan of ₹30 lakh, ₹50 lakh or ₹1 crore: Higher EMI or longer tenure—Here's what works better. Calculation explained

The Reserve Bank of India's Monetary Policy Committee (RBI MPC) unanimously voted to raise the repo rate by 25 bps to 5.50% from 5.25% on 7 October, marking the first such increase in over three years, since February 2023.

RBI Governor Sanjay Malhotra, in his speech, flagged the threat of inflation, citing that global inflation may increase sharply, prompting global monetary tightening, noting that in the current economic situation, rate cuts are not a possibility in the near term. Watchers thus expect more hikes or a pause on current interest rates in the coming MPC meetings as well.

Notably, the RBI's decision to raise its interest rates has a direct impact on borrowers and investors. After the central bank's decision, several banks hiked their repo-linked lending rates, thus making loans linked to these benchmarks potentially more expensive.

Prominent lending institutions such as State Bank of India (SBI), Punjab National Bank (PNB), Bank of India, Indian Bank, Bank of Baroda and Canara Bank have revised their respective lending benchmarks in October 2026.

When it comes to home loans, borrowers have a choice to either increase their equated monthly instalment (EMI) or extend the repayment tenure. While the second option offers immediate relief, it can increase the total interest paid over the life of the loan.

However, there is no one right answer. For borrowers already managing substantial expenses, other loan repayments or those with irregular incomes, a higher EMI amount could be difficult to honour. In such cases, extending the tenure can help manage their monthly budget even though the loan remains outstanding for longer.

In principle, increasing the EMI while retaining the original tenure helps repay the outstanding principal faster. This is because home loan interest is calculated on the outstanding principal. On the other hand, spreads repayment over a longer period. While this reduces the immediate repayment pressure, interest continues to accrue for additional months.

Today, we illustrate and compare impact of the repo rate hike on your ₹30 lakh, ₹50 lakh, ₹80 lakh or ₹1 crore home loans, for both scenarios on the assumption that your base interest rate (p.a.) was 8.00% to be repaid over 20 years (240 months). After rate hike, your new interest rate (p.a.) jumps to 8.25%. Check calculations:

As seen in the comparative illustration above, purely on numbers, across the various home loan sizes, choosing higher EMI is consistently better in terms of reducing your overall financial burden. In case of the ₹30 lakh, ₹50 lakh, ₹80 lakh and ₹1 crore home loans, the difference is 2.6 times.

In case you are unable to choose the higher EMI option, borrowers can opt for partial prepayment at a time suitable to their finances to help reduce the outstanding principal, potentially lowering the interest burden.

Jocelyn Fernandes is a journalist and editor with nearly 13 years of experience covering the business, corporate, economy and markets beats in news.<br> As chief content producer for around three years at Livemint (Hindustan Times), Jocelyn publishes breaking stories, explainers, features and live blogs on a range of business and economy topics, including the Budget, corporate developments, stock markets, income tax, money and personal finance, cryptocurrency, government policy, impact of US tariffs, international developments and more.<br> Jocelyn's writing philosophy is focused on delivering news in an accurate and accessible format for readers. She thus focuses her news coverage on explainers and FAQs in order to breakdown business, corporate, economic, and policy topics that are of importance to everyday readers.<br> She holds a Bachelors in Mass Media (BMM) and Post Graduate Diploma (PGD) in Journalism and Communication and has previously written for online business and markets news site Moneycontrol (Network18), Business-to-business (B2B) trade publications — the industry magazines Power Today and Solar Today (ASAPP Media), and the national news agency United News of India (UNI).<br> Outside of work, Jocelyn keeps up-to-date with local and international news, enjoys reading fiction books, novels and short stories, and enjoys movies, travelling and art. <br> She can be found on X and LinkedIn, and reached by email: <a href="jocelyn.fernandes@htdigital.in">jocelyn.fernandes@htdigital.in</a> <br> X/ Twitter handle: <a href="https://x.com/scribeJocelyn">@scribeJocelyn</a> <br> LinkedIn: <a href="https://in.linkedin.com/in/jocelyn-fernandes-journalist">LinkedIn</a>

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HomeMoneyPersonal FinanceHome loan of ₹30 lakh, ₹50 lakh or ₹1 crore: Higher EMI or longer tenure—Here's what works better. Calculation explained

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