Ultimate Guide to Calculating Your Home Loan EMI
Home loan EMI calculators provide accurate, immediate EMI calculations and provide you with financial planning to repay the loan by calculating due interest based on the loan tenure and interest rates. These EMI calculators can be accessed online from anywhere to plan and manage amounts to be paid every month. The home loan EMI calculator helps in determining whether to increase or decrease the tenure, depending on the budget.
What is a Home Loan EMI?
EMI stands for Equated Monthly Instalments. It includes repayment of the Principal amount and payable interest on the outstanding home loan amount by understanding EMI Calculations.
The home loan EMI calculator helps to divide the tenure of a loan so that an affordable amount is paid every month. A longer-term tenure (i.e. tenure of 30 years) helps in reducing the EMI amount by distributing the repayment over a very long period. This allows borrowers to pay lesser amount for a longer period of time and manage their finances as per their budget.
Factors Influencing Your Home Loan EMI
There are 5 Major factors that impact your home loan EMI:
1. Loan Amount:
The loan amount refers to the principal amount borrowed. A higher loan amount results in higher EMI, remaining other factors constant. To manage this and to reduce your EMI payments, save and invest more money for a larger down payment.
2. Interest Rate:
The interest rate depends on the tenure (or years) and down payment. If the down payment is more and tenure is less, the interest will automatically become less, but if the tenure is more and the down payment is less, interest will automatically increase.
Note: Many banks charge higher amounts for larger loan amounts.
3. Loan Tenure:
If the tenure is high, then the EMI will automatically become less given the same amount, and vice versa.
4. Loan to Value Ratio (LTV):
LTV ratio is a ratio of money that can be borrowed as a home loan. To get a lower LTV ratio, it is necessary to make a larger down payment, which will result in a lower EMI. If a borrower wants to make a small down payment, it leads to an increase in the LTV ratio and higher EMI.
5. Processing Fee and Charges:
Lenders usually charge processing fees and other charges to approve your home loan. The processing fee is usually deducted from the loan amount and affects the EMI and total loan amount. Calculate these charges when estimating your EMI.
How to Use a Home Loan EMI Calculator
The home loan EMI calculator makes calculations based on the EMI calculator guide. The EMI calculation formula is as follows:
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EMI=[PxRx(1+R)^N]/(1+R0^N-1]
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P stands for Principal loan amount
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R is the monthly interest
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N is the number of monthly instalments or the loan tenure in months.
This calculation formula does not include processing fees or other charges that are levied by the bank. Make sure to take those charges into consideration to calculate how much you would end up paying.
Manual EMI Calculation Example
Mr. Batra has borrowed a home loan amount (Principal amount or P) of Rs. 35,00,000 (35L.) from a reputed bank. The bank has a rate of interest (R) at 8.65% p.a. The loan tenure (N) is 360 months for 30 years. EMI will be:
P = 3,500,000
R = 8.65%
N = 360 Months or 30 years.
EMI = [PxRx(1+R)^N]/(1+R0^N-1]
Monthly EMI will be Rs. 27,285
EMI paid for the year= 27,285*12= Rs. 327,419
Benefits of Using a Home Loan EMI Calculator
The home loan EMI calculator tool helps you plan your home loan more accurately, instantly and conveniently with care. These useful EMI Calculator benefits are as follows:
1. Fast and accurate calculations:
Using a pen and paper will take forever, and can lead to some errors, but the home EMI calculator is very reliable and fast in calculations. These calculations are made in one click, with with all the details.
2. Beneficial in home loan planning:
The EMI calculator shows the total cost of borrowing together with each EMI, and so, helps compare all the bank interest and duration with EMI details in a few minutes. This will result in choosing the best home loan planning options with specific details.
3. Financial Planning:
EMI calculator helps calculate the prepayments to help in repaying the loan before the deadline.
Comparing Different Home Loan Offers
EMI calculators help you make the right decision by comparing EMI amounts, Interest Rates and Tenure. The calculations can be calculated comparing home loans and loan offers using the table below, such as comparing the bank and the percentage you owe.
Sr. No. | Name of Lenders | Up to Rs. 30 Lakh | Above Rs. 30 Lakh & Up to Rs. 75 Lakh | Above Rs. 75 Lakh |
|---|---|---|---|---|
1 | 8.40% – 10.65% | 8.40% – 10.65% | 8.40% – 10.90% | |
2 | 8.45% – 10.25% | 8.40% – 10.15% | 8.40% – 10.15% | |
3 | 8.50% – 10.00% | 8.50% – 10.00% | 8.50% – 10.00% | |
4 | 8.40% – 10.15% | 8.40% – 10.05% | 8.40% – 10.05% | |
5 | 8.35% – 10.75% | 8.35% – 10.90% | 8.35% – 10.90% | |
6 | 8.30% – 10.75% | 8.30% – 10.75% | 8.30% – 10.75% | |
7 | 8.45% – 10.30% | 8.45% – 10.30% | 8.45% – 10.30% | |
8 | 8.35% – 11.15% | 8.35% – 11.15% | 8.35% – 11.15% | |
9 | 8.50% – 11.25% | 8.45% – 11.25% | 8.40% – 11.15% | |
10 | 8.40% onwards | 8.40% onwards | 8.40% onwards |
Frequently asked questions
Q
What is a Home Loan EMI?
A
Home loan EMI is the monthly fixed amount to be paid on the principal amount of loan for purchasing a home.
Q
How do I calculate my Home Loan EMI?
A
Use this formula: EMI=[PxRx(1+R)^N]/(1+R0^N-1], where P stands for Principal loan amount, R is the monthly interest and N is the number of monthly instalments or the loan tenure in months.
Q
What factors affect my Home Loan EMI?
A
Six major factors influencing home loan EMI are: Loan amount, Interest rate, Loan tenure, Prepayments and Part payments, type of loan and Loan to Value ratio (LTV).
Q
Can I use an EMI calculator for any loan amount and tenure?
A
Yes, anyone can take advantage of the EMI calculator from anywhere online.
Q
How can I reduce my Home Loan EMI?
A
Home loan EMI can be reduced by increasing the tenure amount (i.e. 30 years).
Q
What is the formula for calculating Home Loan EMI?
A
EMI=[PxRx(1+R)^N]/(1+R0^N-1], where P stands for Principal loan amount, R is the monthly interest and N is the number of monthly instalments or the loan tenure in months.
Q
How does the interest rate affect my Home Loan EMI?
A
The rate of interest increases when the down payment is less and tenure (number of years) is more, and vice versa.
Q
What is an amortization schedule in Home Loan?
A
An amortization schedule is a record of the loan amount with principal amounts and interest of each payment.
Q
Can I make prepayments to reduce my Home Loan EMI?
A
There are exceptions to the five-year rule for gratuity eligibility. If an employee’s service ends due to death or disablement, they are eligible for gratuity, irrespective of completing five years.
Q
How do I choose the best Home Loan offer based on EMI calculations?
A
To reduce the EMI amount, either reduce the loan amount or increase your Number of years (tenure).