Sources: RBI circular RBI/2023-24/55 on resetting floating interest rates (choice of EMI, tenure or prepayment). Gold purity: BIS hallmark fineness (22K = 916).
Frequently asked questions
How can I reduce my home loan EMI?
Four ways: get a lower rate (ask your bank or move the loan), stretch the tenure, prepay a lump sum and ask for a lower EMI, or prepay regularly. On a ₹30 lakh loan at 9% with 15 years left, a 0.5% lower rate cuts the EMI by ₹886.
Is it better to reduce the EMI or the tenure after prepaying?
Reducing the tenure saves more interest, because the same EMI keeps paying the loan down faster. Choose a lower EMI only if the monthly amount is the problem.
Should I take a longer tenure to lower my EMI?
Only for a while. In the example, 5 more years lowers the EMI by ₹3,436 but adds ₹10.01 lakh of interest. Prepay later to win the time back.
Should I sell gold to prepay my home loan?
Gold you do not wear earns nothing, while the loan costs you 9% a year. In the example, 20 grams of 22K gold put into the loan saves ₹5.5 lakh of interest and finishes it 2 years 1 month sooner. Keep gold you need for a family event or an emergency.
Can my bank change my EMI when rates rise?
For a floating-rate loan, yes. RBI asks banks to explain the effect and to let you choose between a higher EMI and a longer tenure, or to prepay.