A Complete Guide on How to Calculate Home Loan EMI

home loan EMI

Home loans are suitable financing options that help individuals to buy their desired property or building. However, individuals opting for home loans should know how to calculate home loan EMI to plan their expenses accordingly. It will also help them choose the loan amount as per their repayment capability and eligibility.

Here is a detailed guide on how to calculate EMI for home loan. 

How to calculate home loan EMI?

Home loan EMI is calculated by using the following formula:

P x R x (1+R) ^N / [(1+R) ^N-1]

Here, P stands for the principal loan amount, N stands for loan tenure in months and R stands for monthly interest rate. R is calculated as annual rate of interest / (12×100).

For instance, if the rate of interest is 7.2% p.a., then r = 7.2/ (12×100) = 0.006

For a person availing a loan of Rs.10, 00,000 at an annual interest rate of 7.2% for a tenure of 120 months (10 years), home loan EMI will be calculated in the following way:

EMI= 10, 00,000 x 0.006 x (1 + 0.006)120 / ((1 + 0.006)120 – 1) = Rs.11,714.

  • The total amount payable to the lender will be Rs.11,714 x 120 = Rs.14, 05,703. 
  • Principal loan amount is Rs.10, 00,000
  • Interest amount to be paid will be Rs.4, 05,703

However, manually computing the home loan EMI can be time-consuming, and prone to miscalculation. So, borrowers can calculate home loan EMI using online calculators for an errorless computation.

How to use a home loan EMI calculator?

Here are the steps to follow while computing the EMI amount using the home loan EMI calculator:

  1. Borrowers need to visit the home loan page on the lender’s website
  2. Then, they can navigate to the home loan EMI calculator
  3. Borrowers need to enter their loan amount, loan tenor and interest rate
  4. The result will be displayed instantly 

Thus, borrowers can check the payable home loan interest rate, EMI amount, total outstanding, etc., by entering the proper inputs. It will help them determine an affordable home loan amount and plan their finances accordingly.  

What are the benefits of using a home loan EMI calculator?

Top benefits of using a home loan calculator include:

  • Saves time and provides accurate results

Manual home loan calculations consume time, and individuals can make mistakes while computing the amount. A minor mistake can affect the entire output and create confusion. Thus, borrowers should use a home loan calculator for an error-free result.

  • Provides appropriate break-ups

Several financial charges, such as loan processing charges, total payable interest, stamp duty fees, etc., are associated with a home loan. When individuals use home loan calculators, they can get an accurate break-up of the principal amount, amount, interest payable, etc.

  • Helps compare various home loan interest rates

Using a home loan calculator, borrowers can compare the interest rates offered by multiple lenders. It will help them choose a suitable lending institution offering lower home loan interest rates. Even a mere difference in interest rates can heavily affect the EMI amount. So, borrowers should compare the charges before taking the final decision.

  • Assists in planning finances

Individuals can use an calculator for home loan to get an idea of the amount they need to keep aside for repaying their loans. Thus, it helps them plan their budget for other expenses accordingly. This way, individuals can repay their loans on time without affecting monthly expenses. 

Besides, borrowers can check their pre-approved offers to get the best deals on their housing loan. Lenders provide pre-approved offers for financial products like loans against property and others. One can easily check the offers by entering their basic details, such as name, and contact number, on the required fields. 

What are the factors affecting home loan EMIs?

Here are some of the factors that can affect a borrower’s loan EMI:

  • Principal amount: The principal amount or the sanctioned loan amount is directly related to the monthly payable EMI. However, the sanctioned principal amount depends on the applicant’s eligibility, which can be calculated using a home loan eligibility calculator.
  • Tenor: A longer tenor helps reduce the EMI amount; however, a shorter tenor will decrease the total payable interest amount.

So, if borrowers need to learn how to calculate loan EMI, they can check out the procedure mentioned above and proceed. It will help them assess their repayment capacity and budget and plan accordingly.