Home Loan Update 2026: Owning your own home is everyone’s dream, but a lack of financial planning can make this dream a burden. As of February 5, 2026, obtaining a home loan has not only become easier, but the Reserve Bank of India (RBI)’s new rules have also provided significant relief to customers from bank arbitrariness. If you’re planning a loan, it’s crucial to understand the changing mathematics of eligibility and prepayment.
What is your home loan eligibility
Banks primarily consider your repayment capacity to determine how much loan to offer. Following the RBI’s new guidelines in 2026, some eligibility criteria have become more liberal. Now, for homes up to ₹30 lakh, banks can lend up to 90 percent of the property value, provided you have a stable monthly income.
Applicants with incomes above ₹25,000 are generally given priority, and those with a credit score of 750 or higher are offered the lowest interest rates. Additionally, banks can now exclude expenses like stamp duty and registration when calculating the loan-to-value (LTV) ratio, reducing the burden on buyers with the initial down payment.
RBI’s New Prepayment Rules
The Reserve Bank of India has implemented the ‘Prepayment Charges on Loans Directions, 2025,’ which is a boon for home loan borrowers. All floating-rate home loans approved or renewed after January 1, 2026, will no longer incur any prepayment or foreclosure charges. Whether you choose to repay from your savings or transfer your loan to another bank with a better rate, the bank will not charge any penalty.
The biggest relief is that there will no longer be a lock-in period, meaning you can close the loan immediately after taking it without any penalty. This rule applies to both individual borrowers and micro and small enterprises (MSEs).
Home Loan Calculator and Documents
Using an EMI calculator before taking a loan has become even more important now that bank rates have fallen between 7.5% and 8.5% after the repo rate cut in 2026. This tool helps you understand that while extending the term may reduce your installments, it increases the total interest burden.
Furthermore, the RBI has now mandated that the bank return your original documents within 30 days of the loan’s full disbursement. If the bank delays this, it will be charged a penalty of ₹5,000 per day.
When and how to make a prepayment
Always compare your savings and investment returns when deciding whether to prepay. If your investments are offering higher returns than your home loan interest rate, investing the money may be a better option. However, with the RBI’s new “zero penalty” rules, closing your loan has become much more affordable.
You can close your 20-year loan in approximately 17 years by paying just one additional EMI a year. Always ensure you obtain an updated statement and confirm the outstanding balance with your bank when making a prepayment.
Vikram Singh
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