Fixed vs Floating Home Loan Interest Rate: How to Choose

How a floating rate works

A floating-rate loan is linked to an external benchmark, commonly the RBI repo rate. When the benchmark moves, your lender adjusts the rate after a reset date. You then pay either a different EMI or the same EMI for a longer or shorter time, depending on the lender’s method.

How a fixed rate works

A fixed rate stays the same for a set period, often the first few years, after which many loans convert to floating. It protects you from sudden rises but is usually priced higher, and you will not benefit if market rates fall.

Side by side

• Starting rate: floating is usually lower; fixed is usually higher.
• Predictability: fixed gives a steady EMI; floating can change.
• Prepayment: floating loans for individuals generally have no prepayment penalty under RBI rules; fixed loans may.
• Best for: floating suits borrowers who can absorb changes and plan to prepay; fixed suits those on tight, predictable budgets.

How to decide

1. Calculate the EMI at today’s rate and at a rate 1 to 2 points higher using the EMI calculator. If the higher EMI still fits your budget, floating is safe.
2. Think about your timeline. If you will prepay in a few years, a floating loan is more flexible.
3. Ask each lender how often the rate resets and whether you can switch rate type later, and at what cost.

See also: the home loan checklist.

This article is for general information only and is not financial, legal or tax advice. Interest rates, fees and rules change, so confirm current terms with the lender or the regulator before you decide. Examples use illustrative figures. Last reviewed: October 2026.