Why your loan changes when the rate does
Most home loans to individuals are floating-rate and linked to an external benchmark. When the rate resets, your lender either adjusts the EMI or, more commonly, keeps the EMI and changes how long the loan runs.
Example: ₹50 lakh, 20 years, rate moves from 8.5% to 9% after 5 years
| If the lender… | EMI after change | Loan ends in | Total interest |
|---|---|---|---|
| Keeps the EMI (tenure changes) | ₹43,391 | 21y 0m | ₹59,30,369 |
| Adjusts the EMI (tenure kept) | ₹44,692 | 20y 0m | ₹56,48,071 |
| No change (stays at 8.5%) | ₹43,391 | 20y 0m | ₹54,13,879 |
A small rate change looks harmless month to month but compounds over many years. Keeping the EMI fixed quietly extends the tenure.
What you can do
- Check your loan statement after each reset to see whether tenure or EMI changed.
- If the rate rises, a small regular prepayment can offset the extra tenure.
- Compare your spread over the benchmark with current offers before deciding to stay or switch.
Frequently asked questions
Does my EMI change when the repo rate changes?
It depends on your loan terms. Many lenders keep the EMI constant and change the tenure; others change the EMI. Your loan agreement and statements show which applies.