A home loan is likely to be the most significant debt a person will ever incur. It is a secured loan in which the bank mortgages your property and you must pay the bank the total loan amount in EMIs to complete the transfer of ownership of your property. Borrowers typically wish to minimise their home loan interest rates and EMIs due to the large loan amount. If you take out a home loan without carefully arranging your interest rates and EMIs, you may face difficulties managing your expenses and savings because the loan has a longer duration and large EMIs.
Therefore, before applying for a home loan, the most important thing is to find the best lender offering the lowest interest rates and calculate your monthly EMIs according to your monthly budget and your repayment capacity.
What is Home Loan EMI?
Home loan EMIs are equivalent monthly instalments that you must pay to the bank on a monthly basis to pay off the whole loan amount, after which the property will be fully owned by the borrower. It includes repaying the principal as well as paying interest on the outstanding balance of your home loan.
How to calculate Home Loan EMI?
You can calculate home loan EMI by using the tool Home Loan EMI Calculator available on almost every lender’s website. This tool can help you understand the maximum EMI amount you are able to pay every month without any defaults. The EMI calculator for a home loan provides a clear picture of the amount that must be paid toward the EMIs and assists in making an informed decision about the monthly outflow for the housing loan and your other miscellaneous expenses. As a result, understanding your EMI is critical for determining your home loan eligibility and better planning your home purchase process.
What is a Home loan EMI Calculator?
The House Loan EMI Calculator aids in calculating the loan instalment, often known as the EMI, for your home loan. It’s a simple calculator that can help a home buyer plan their finances. To calculate your home loan EMI using the Home loan EMI Calculator, you need to enter your desired loan amount, the interest rate charged by the lender and your desired loan tenure.
The formula for home loan EMI calculation is as follows-
P x R x (1+R)^N / [(1+R)^N-1] where-
- P denotes the amount of the principal loan
- N is the number of months it takes to repay a loan.
- R stands for the monthly interest rate.
The monthly interest rate (R) on your loan is determined by using the below formula-
R = Annual Interest Rate/12/100
For example- Mr. Ram has taken a home loan of Rs 35,00,000 from a reputed bank with an interest rate of 6.75% for a period of 20 years. The monthly interest rate will be 0.0056%.
The EMI for Mr. Ram’s Home Loan, according to the above formula, will be-
3500000 X 0.0056 X (1+0.0056) 20 / [(1+0.0056) 20-1] = Rs. 20,631.57
Hence, it is better to use a home loan EMI calculator to plan your EMIs and your monthly budget better so that you do not face any issues in the future in paying your installments or managing your expenses.
Read Also:- How much CIBIL Score Required for Home Loan
