Compare EMI, rate type, tenure, fees, prepayment and total interest.
Compare Total Cost
Look beyond interest rate: processing fee, legal charges, insurance and reset rules also matter.
A longer tenure reduces EMI but raises total interest.
Ask every lender for the Key Fact Statement. RBI requires one for retail loans, and it shows the annual percentage rate, which folds fees into a single comparable cost figure.
Ask whether any linked insurance policy is optional. A single premium added to the loan amount also accrues interest for the full tenure.
A Worked Comparison
Loan A is ₹50 lakh for 20 years at an illustrative 8.40% with a ₹25,000 processing fee. Loan B is 8.25% with a ₹50,000 fee. Fees attract 18% GST, so the upfront costs are ₹29,500 and ₹59,000.
Loan A's EMI is about ₹43,075 with total interest of about ₹53.4 lakh. Loan B's EMI is about ₹42,603 with total interest of about ₹52.2 lakh. Loan B costs ₹29,500 more upfront but saves about ₹1.1 lakh of interest over the full term; if you plan to prepay heavily or switch within a few years, the gap narrows.
Understand The Rate Type
Most floating-rate home loans are linked to an external benchmark such as the RBI repo rate, plus a spread that usually stays fixed for the loan. A lower spread matters more than a temporary teaser rate.
Ask how often the rate resets and whether the lender will change the EMI or the tenure when rates move. RBI rules require lenders to offer borrowers a choice at reset, so know which option applies by default.
Check Flexibility
Prepayment rules, part-payment limits and rate conversion charges can affect future decisions.
Ask for examples before signing.
RBI rules don't allow prepayment penalties on floating-rate loans taken by individuals for non-business purposes, but fixed-rate loans can carry charges. A balance transfer is an option later; weigh the interest saved against fees, legal and valuation charges.
Stress Test
Check whether EMI remains comfortable if income is delayed or rates increase.
On a ₹50 lakh, 20-year loan, a move from 8.5% to 9% raises the EMI from about ₹43,391 to ₹44,986. If the lender extends the tenure instead, the cost shows up as many more months of EMIs.
Which Calculator To Use
Use the Home Loan Calculator to compare EMIs and amortisation for each offer, the Prepayment Strategy Calculator to see how part-payments change the picture, and the Rent vs Buy Calculator if the loan decision is still tied to whether to buy.