Understanding EMIs, reducing balance interest, amortisation, prepayments and repo rate changes can help you lower the total borrowing cost of your home loan. It can also help you decide whether surplus funds are better used to prepay or invest.Bajaj Finance Home Loan offers rates from 7.25% p.a., loan amounts up to Rs. 15 crore, and tenures up to 32 years. Before applying, use the home loan EMI calculator to estimate instalments and compare tenures.How is home loan EMI calculated in the reducing balance method?In the reducing balance method, as the principal falls, the interest charged in later months falls too, even though the EMI stays the same.The formula is:EMI = P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1]P = Principal loan amountr = Monthly interest rate (annual rate ÷ 12)n = Total number of monthly instalmentsFor a Rs. 15 lakh loan at 8.5% p.a. for 20 years, the monthly rate is 0.7083% and the tenure is 240 months, giving an EMI of approximately Rs. 13,018.The Rs. 15 lakh home loan EMI stays constant, but its breakup changes monthly. Early on, a larger share goes towards interest because the outstanding principal is high. As repayment progresses, the interest component shrinks and the principal component grows.How does loan amortisation work in a home loan in India?Amortisation is the gradual repayment of your loan through fixed EMIs, each split between principal and interest. Over the tenure, the principal component rises and the interest component falls.Loan stageInterest componentPrincipal componentInitial yearsHigherLowerMiddle yearsGradually decreasesGradually increasesFinal yearsLowerHigherThis is why borrowers pay a large share of total interest in the early years and why an early prepayment saves far more than a late one. Since interest is charged on the outstanding principal, reducing that balance sooner lowers interest for every remaining month. The same prepayment made near the end of the tenure saves comparatively little, because most interest has already been paid.How much interest can prepayment save on a home loan?A prepayment directly reduces your outstanding principal, so under the reducing balance method an early prepayment can cut total interest substantially.Assume a Rs. 30 lakh loan at 8.5% p.a. with 19 years remaining and a one-time prepayment of Rs. 2 lakh. Lenders typically offer two options:OptionResultReduce the loan tenureEMI stays the same, the loan closes earlier, interest savings are higherReduce the EMITenure stays the same, monthly outgo falls, interest savings are lowerPaying one extra EMI a year works the same way: each additional payment lowers the principal ahead of schedule, so future interest is calculated on a smaller balance. Over a long tenure this can meaningfully shorten the loan.If your goal is to minimise total borrowing cost, reduce the tenure. If monthly cash flow matters more, reduce the EMI.Prepayment policy is worth comparing across lenders. Individual borrowers with floating-rate Bajaj Finance Home Loans can part-prepay or foreclose without foreclosure or part-prepayment charges. Although one should review other charges, such as processing fees and bounce charges, before deciding.How does the repo rate affect floating rate home loans?The RBI repo rate determines interest rates on floating-rate home loans linked to an external benchmark. When the RBI revises the repo rate, lenders using externally benchmarked lending rates (EBLRs) typically pass the change on at the next scheduled reset, as per RBI guidelines.If the repo rate falls by 0.25%, the rate on an eligible floating-rate loan may fall too. On a Rs. 30 lakh outstanding balance, even a small reduction can lower the EMI or shorten the tenure, depending on the option you choose. A repo rate increase works in reverse.Knowing how your loan is benchmarked helps you decide whether to stay with your lender, refinance, or prepay during a rising-rate cycle. Borrowers can also explore the Bajaj Finance Home Loan Balance Transfer facility, with a top-up loan of up to Rs. 1 crore or more subject to eligibility, approvals in as little as 48 hours* for eligible applicants.How Bajaj Finance supports home loan repayment planning?Bajaj Finance offers home loans of up to Rs. 15 crore* with interest rates starting at 7.25%* p.a., and repayment tenures up to 32 years*. You can also use financial tools like the Bajaj Finance Home Loan EMI Calculator to plan your home loan and model the effect of part-prepayments on your EMI.For borrowers transferring an existing home loan, Bajaj Finance offers a balance transfer facility with rates starting at 7.30%* p.a. and a top-up loan of Rs. 1 crore* or higher, with end-use flexibility.What are the eligibility criteria for a Bajaj Finance Home Loan?Checking your eligibility before applying can help you prepare the right documents and avoid delays.CriterionDetailsNationalityIndian citizen residing in IndiaAge23 to 67 years (salaried)23 to 70 years (self-employed)CIBIL Score725 or aboveEligible occupationsSalaried employees, professionals, and self-employed individualsDocuments requiredKYC documentsIncome proof (salary slips/ P&L statements)Business proof (self-employed applicants only)Bank statements for the last 6 monthsProperty documentsUnderstanding the mathematics behind a home loan can help you make better borrowing decisions long after your loan is approved. From calculating your EMI using the reducing balance method to understanding amortisation, planning prepayments, and tracking repo rate changes, every decision can influence the total interest you pay over the loan tenure.The above content is non-editorial, and TIL hereby disclaims any and all warranties, expressed or implied, relating to the same. TIL does not guarantee, vouch for or necessarily endorse any of the above content, nor is it responsible for them in any manner whatsoever. The article does not constitute investment advice. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified.