Home Loan Amortization Schedule in India

Summary

An amortization schedule for an Indian home loan shows how each monthly EMI splits between interest and principal repayment over the full tenure. In the early years, most of the EMI goes towards interest; principal repayment accelerates towards the end. Understanding this schedule helps borrowers evaluate prepayment strategies.

How it works

Monthly breakdown

Each month the outstanding balance reduces by the principal portion of the EMI:

• Interest component = Outstanding balance x monthly rate
• Principal component = EMI - Interest component
• New balance = Outstanding balance - Principal component

The front-loading problem

On a Rs 50 lakh loan at 7.25% for 20 years, in month 1 the interest is Rs 30,208 out of a Rs 39,457 EMI — meaning 76% of the EMI goes to interest. By month 120 (halfway), the split is roughly 50-50. By the final years, almost the entire EMI is principal.

Impact of prepayment

Since RBI prohibits prepayment charges on floating-rate loans, borrowers can make lump-sum payments to reduce the outstanding principal. This reduces either the tenure or the EMI amount. Prepaying early in the loan tenure saves the most interest because it reduces the base on which future interest is calculated.

Worked example

Loan: Rs 50 lakh, Rate: 7.25%, Tenure: 20 years, EMI: Rs 39,457

Total interest over 20 years: Rs 44,69,680. A one-time prepayment of Rs 5 lakh in year 3 would save approximately Rs 7.5 lakh in interest and reduce tenure by about 2.5 years.

Key differences from other markets

• No prepayment penalty on floating-rate loans (per RBI mandate) — this is a significant advantage over markets like the US, where fixed-rate mortgages may carry break costs.
• Floating rate resets can change the amortization schedule mid-tenure. When the repo rate rises, banks may increase tenure rather than EMI, pushing principal repayment further out.