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What factors affect the home loan EMIs?

One of the biggest financial commitments is a home loan. These are big-ticket loans, and hence, minor mistakes can cause massive concerns in the future. When you decide to apply for home loan, you take multiple precautions. Among many other things, you need to be wary while selecting the lender and their needs.

Before you visit the lender, there are few lender policies that you should be aware of. Often, borrowers consider the interest rates, tenure, and possible EMI they need to pay using the home loan calculator. But these are not the only important factors. Here are some other crucial aspects of the lender which affects your EMIs –


Called as Marginal Cost of Funds based Lending Rates is a methodology from the Reserve Bank of India. The MCLR sets the lending rate on loans by the commercial banks to the mass. MCLR depends on four components – the marginal fund cost, premium tenure, operating expenses, and Cash Reserve Ratio. Based on these, the banks decide the MCLR.

All the home loans in India are linked to MCLR. The interest rates on any loan depend on the MCLR of a specific bank. This varies between banks. When you search for a housing loan, you will find the MCLR of that bank. If the MCLR is low, the home loan interest rates will be low as well. You can find this MCLR on the bank portal and accordingly use the home loan EMI calculator for inputting the interest rates.


The home loan interest rates include two components – the base rate and the spread or mark-up. The base rate is the one below, which the RBI does not enable the banks to lend. The spread is the margin on the base rate, which depends on the consumer and product. Suppose the bank has a spread of 0.10%; you need to pay an interest rate of more than 0.10% base rate. It means, if your bank has a higher spread or mark-up, the interest rates will be higher.

Reset period

The reset period is the next term that affects the EMIs and closely related to MCLR. The MCLR of any bank supposedly declares overnight, monthly, half-yearly, or annually, although banks do declare the MCLR according to specific rules. Most banks link their housing loans to six months MCLR or 12 months MCLR. If the borrower takes the home loan based on 12 months MCLR, the interest rates reset after 12 months.

Home loans are a massive amount and run for a long time. When the tenure is long, and the amount is high, the smallest difference in the interest rates can affect your EMIs. This is where your EMI calculator for home loan can make a huge difference.

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