How to calculate Home loan EMI?

A house is not just a concrete building made up of bricks and cement; it is way more than this; it is a dream, an aspiration which most people have. That is why it is most popularly known as home. Owning a house is no mean feat, skyrocketing land prices and exorbitant construction expenditure make it a well-nigh for an individual to fulfil his aspiration of building a house.

A home loan comes as a rescuer and provides an individual with the financial asset to meet the cost associated in building a home. Home loan not only helps an individual to construct a house, but it also assists one in meeting the expenses related to the construction and renovation of home.

Home loan 

More often than not, a home loan involves a high loan amount which generally lasts for a longer period of time. It keeps the borrower indebted until the principal amount and interest is not paid. As the home loan involves a huge loan amount, a fixed and high proportion of borrower’s income goes in making the home loan EMI payment. So, the decision to take a home loan should not be based on mere gut instincts; rather, proper research and calculations must be done before taking the home. Borrowers must take help of a home loan EMI calculator, which is freely available on all lender’s websites. He must calculate the home loan EM, repayment period and must compare this with his disposable income. It will help one to gauge the loan repayment capability. 

Home loan calculator

 Home loan calculator is an online device available at all the lender’s website it assists one in calculating the EMI payment, loan repayment tenure and thus helps one in opting for the best loans according to individual requirement.

 There are basically three components of the home loan EMI calculator:

1. Principal amount

  • 2. Loan tenure
  • 3. Interest rate 

The online calculator assists an individual to calculate the payable EMI over a specified tenure at an interest rate determined on the basis the loan amount and tenure. The individuals can opt to enter innumerable permutations and combinations of tenures or interest rates to select the best loan which suits his requirements.

Formula of Home loan EMI calculation

The home loan calculator helps in EMI calculations using the formula

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

 Where, 

EMI = Equated monthly instalment 

P = Amount borrowed as loan 

R = Rate of interest

R = Repayment tenure or the number of instalments 

Principal loan amount: The principal loan amount is the loan amount an individual you wish to borrow. The principal amount does not include the downpayment. For instance, if the property value is two crores, and the borrower can afford to pay 30% as down payment, then the principal loan amount would be one crore 40 lakhs. The lender will apply the interest rate to the one crore and 40 lakhs, and the EMI amount is determined on the basis of the principal loan amount, interest rate and tenure. 

Interest Rate: Individual pays interest at loans. Each lender offers a different interest rate, and the borrower should look for a minimum interest rate offered. 

Tenure:  Tenure or the repayment period refers to the time involved in the payment of home loans. The home loan generally consists of a period of 10-15 years.

Benefits of Home loan EMI calculator calculator

1. Home loan calculator is readily available, and individuals with basic internet service can use it without paying any cost. Most banks provide the E- calculator for the to help users to compute the EMI payment.

2. Calculating EMI payment is not an easy peasy task. It needs a person to be aware of the formula, and even after knowing the method, the time involved in calculating is too much. Home Loan EMI calculator computes in no time and helps one to save time and energy

3. Home loans come with varying rates of interest and repayment tenures. Home loan calculators assist one in selecting the best one by changing the different factors like interest and tenure.