How the Home Loan Principal Repayment Process Works – A
Simple Guide for Borrowers

When you apply for a Home Loan, you repay it through EMIs. Every EMI constitutes two components — part of it goes towards interest, and part towards principal repayment. This process, known as amortisation, determines how quickly you reduce your loan balance over time. Understanding this balance is key to managing your finances wisely and repaying your loan efficiently. 

This guide explains the Home Loan principal repayment process, illustrating it with a sample schedule of Home Loan repayment. 

What Is Amortisation in a Home Loan?

Amortisation is the systematic way in which each monthly instalment (EMI) is divided between interest and principal. In the early stages of your Home Loan, a larger share of your EMI goes towards interest. Gradually, as the loan progresses, the share of principal repayment increases. 

Put simply, amortisation ensures that over the years, you are slowly reducing your outstanding principal while paying less and less interest on the declining balance. It’s this gradual shift that makes long-term loans manageable — and predictable. 

How Principal Repayment Works?

Every month when you pay your EMI, here’s what happens behind the scenes: 

• The lender first calculates the interest on your outstanding principal for that month. 

• That interest portion is deducted from your EMI. 

• Whatever remains is applied towards reducing the principal. 

• In the next cycle, since the principal is lower, the interest charged decreases slightly, and more of your next EMI goes towards principal. 

Home Loan Principal vs. Interest Repayment

Understanding this distinction helps you see where your money goes. 

• Interest repayment – This is the cost of borrowing. It’s calculated on the current outstanding principal. 
• Principal repayment – This is the repayment of the actual amount borrowed. 

For example, consider a Home Loan of Rs.10 Lakh at an interest rate of 8.45% p.a. The EMI amount will depend on your chosen tenure: 

• For 10 years – approximately Rs.12,370 per month 
• For 20 years – approximately Rs.8,650 per month 
• For 30 years – approximately Rs.7,640 per month 

Sample Schedule of Home Loan Repayment (Amortisation)

To illustrate how principal repayment works, here’s a complete amortisation schedule for a Rs.10 Lakh Home Loan at 8.45% p.a. with a 5-year tenure. 

Month	EMI (Rs.)	Interest (Rs.)	Principal (Rs.)	Outstanding Principal (Rs.)
1	20,505	7,042	13,463	9,86,537
2	20,505	6,951	13,554	9,72,983
3	20,505	6,859	13,646	9,59,337
4	20,505	6,767	13,738	9,45,599
5	20,505	6,674	13,831	9,31,768
6	20,505	6,580	13,925	9,17,843
7	20,505	6,486	14,019	9,03,824
8	20,505	6,391	14,114	8,89,710
9	20,505	6,295	14,210	8,75,500
10	20,505	6,199	14,306	8,61,194
11	20,505	6,102	14,403	8,46,791
12	20,505	6,005	14,500	8,32,291
13	20,505	5,907	14,598	8,17,693
14	20,505	5,809	14,696	8,02,997
15	20,505	5,710	14,795	7,88,202
16	20,505	5,610	14,895	7,73,307
17	20,505	5,510	14,995	7,58,312
18	20,505	5,409	15,096	7,43,216
19	20,505	5,307	15,198	7,28,018
20	20,505	5,205	15,300	7,12,718
21	20,505	5,102	15,403	6,97,315
22	20,505	4,998	15,507	6,81,808
23	20,505	4,894	15,611	6,66,197
24	20,505	4,789	15,716	6,50,481
25	20,505	4,684	15,821	6,34,660
26	20,505	4,578	15,927	6,18,733
27	20,505	4,471	16,034	6,02,699
28	20,505	4,364	16,141	5,86,558
29	20,505	4,256	16,249	5,70,309
30	20,505	4,147	16,358	5,53,951
31	20,505	4,038	16,467	5,37,484
32	20,505	3,928	16,577	5,20,907
33	20,505	3,817	16,688	5,04,219
34	20,505	3,706	16,799	4,87,420
35	20,505	3,594	16,911	4,70,509
36	20,505	3,481	17,024	4,53,485
37	20,505	3,368	17,137	4,36,348
38	20,505	3,254	17,251	4,19,097
39	20,505	3,139	17,366	4,01,731
40	20,505	3,023	17,482	3,84,249
41	20,505	2,907	17,598	3,66,651
42	20,505	2,790	17,715	3,48,936
43	20,505	2,672	17,833	3,31,103
44	20,505	2,554	17,951	3,13,152
45	20,505	2,435	18,070	2,95,082
46	20,505	2,315	18,190	2,76,892
47	20,505	2,194	18,311	2,58,581
48	20,505	2,073	18,432	2,40,149
49	20,505	1,951	18,554	2,21,595
50	20,505	1,828	18,677	2,02,918
51	20,505	1,705	18,800	1,84,118
52	20,505	1,581	18,924	1,65,194
53	20,505	1,456	19,049	1,46,145
54	20,505	1,331	19,174	1,26,971
55	20,505	1,205	19,300	1,07,671
56	20,505	1,078	19,427	88,244
57	20,505	951	19,554	68,690
58	20,505	823	19,682	49,008
59	20,505	694	19,811	29,197
60	20,505	564	19,941	0

 

Over the five-year tenure: 

• The interest component falls from Rs.7,042 to just Rs.564. 
• The principal portion rises from Rs.13,463 to Rs.19,941. 
• The total outgo across 60 EMIs is approximately Rs.12.3 Lakh, meaning Rs.2.3 Lakh is paid as interest over the loan’s lifetime. 

You can view your detailed repayment schedule by using our Home Loan EMI Calculator. 

Why Understanding the Repayment Process Matters?

Knowing how principal repayment works helps you take control of your finances. Imagine this — you receive a yearly bonus or a windfall. Should you prepay your Home Loan or invest it elsewhere? When you understand your amortisation pattern, you can see exactly how much interest you’ll save by reducing your principal early. 

This understanding also helps when: 

• You’re considering refinancing your loan. 
• You want to compare different tenures. 
• You wish to switch from a fixed to a floating interest rate. 

Tips to Manage Your Home Loan Smartly 

To get the most out of your repayment plan: 

• Review your amortisation schedule regularly – It shows how your EMIs are distributed between principal and interest 
• Choose your tenure wisely – Shorter tenures mean higher EMIs but much lower total interest 
• Avoid missed EMIs – Timely payments keep your repayment pattern consistent and your credit score strong 
• Track your principal balance – Monitor how much principal you’ve repaid each year to measure progress 

The Home Loan principal repayment process is at the heart of every borrowing journey. By understanding how each EMI contributes towards repayment, the process becomes easier.