A Guide to the Optimal Use of the Home Loan EMI Calculator
Last Updated : June 4, 2020, 11:55 a.m.
Having his or her own home is something that comes at the top of the list of people having to live in rental accommodation and face problems that come with the same. But if you see the prices of purchasing a house and current real estate value, you will know that it is quite tough for an individual to purchase the home by paying the full value in one go. Because of this, individuals seek an external source of finance. This source is usually a home loan that you can get from either a bank or a housing finance company. These entities provide you the required amount, which can be returned to them by paying easy monthly installments for the tenure you choose to service the debt.
Talking about monthly installments, this is one of the most important aspects of the Home Loan Process. If you are someone who is looking to opt for a home loan, the primary responsibility of you is to have an exact estimate about the monthly installment or EMI amount that you are liable to pay over the tenure. And this is exactly where you can take the advantage of a Home Loan EMI Calculator with which you can know your exact EMI amount. In this article, we will be telling you about several utilities of the Home Loan EMI Calculator so that you can take advantage of this amazing tool. So, let’s start without any further delay!
| Loan Amount | |
| Interest Rate | |
| Tenure(Months) | |
| Monthly Instalment (EMI) | |
| Total Interest Amount | |
| Total Amount (Principal + Interest) |
| Year | Principal | Interest | Balance Amount |
|---|
What is the EMI and a Home Loan EMI Calculator?
Before knowing the utility of a Home Loan EMI Calculator, it is important to know what exactly is this tool and what is the EMI amount? So, let’s first talk about the EMI – Known as the Equated Monthly Installments, it is the fixed sum of money that you need to pay every month over the loan tenure. If you are someone who is opting for a home loan for the first time then it could be a cumbersome task to do all the calculations manually.
This is where a Home Loan EMI Calculator helps you. This amazing tool helps you in doing all these complex calculations in no time and you can get an estimate of your EMI amount instantly.
It is important for you to have an exact estimate about the EMI amount before choosing a home loan as you may miss your payments if the amount is beyond your repayment capacity. So, when you have a certain estimation about the EMI amount, you can choose the suitable loan option for you.
Details You will Need to Use the Home Loan EMI Calculator
To use the Home Loan EMI Calculator, you will need a few details at your disposal to get the right estimation of the monthly installment. Without these details, you will not be able to use this amazing tool. We are providing these details below which you can look at.
Required Loan Amount
The first thing that you will need is the Loan Amount that you will require for your needs. Depending on the value of the property, the loan amount will be ascertained. Home loans are financed upto 75%-90% of the property cost. The remaining left (10%-25%) is your obligation to fulfill. Yes, you need to pay the same to the seller with whom you are transacting for a home purchase. In case you have savings that can help you pay more to the seller than required, use the same and reduce the loan amount. This will only help you pay EMIs smoothly and on time, ensuring a good credit history for you.
Rate of Interest
This is the most important detail that you will need to use in the Home Loan EMI Calculator as your EMI amount is highly dependent on the rate of interest offered by the lender. Higher the interest rates would be, higher would be your EMI amount and vice-versa. That’s why it is advised to choose a lender with lower interest rates. You must also remember that home loan interest rates depend on several factors such as your age, employment type, monthly income, property location, property value, and CIBIL score .
Required Tenure
Tenure is the third and last thing that you will need to put in this tool. It is the number of years that you will need to pay back the loan amount via monthly installments. Home loans are generally taken for a longer tenure ranging from 15 to 20 years. The maximum repayment period for a home loan can be 30 years. You can choose the tenure according to your convenience.
As soon as you will feed these details into the Home Loan EMI Calculator, you will get three things as the result. The first thing would be the EMI amount. Apart from this, you will also get Interest Outgo and the total amount payable over your tenure. You will also get an amortization table by which you can know about the outstanding loan amount at different periods.
How are the Calculations Made?
Now you know the details required to use the Home Loan EMI Calculator, you must want to know about how does the Home Loan EMI Calculator perform calculations? Well, this tool uses a specific home loan EMI Calculator formulae to reach the exact EMI amount. You can look at the formula below.
E = [P x R x (1+R) ^N] / [(1+R) ^N-1]
Where,
E = EMI Amount
P = Principal Amount
R = Rate of Interest
N = Loan Tenure
If you want to do manual calculations, you can put the values in this formula and it will give you the exact EMI amount. But to have a better understanding of the EMI calculations, you must see this example given below.
Suppose an individual wants to opt for a home loan of INR 45 lakh for 15 years at an interest rate of 8.50% per annum. But before finalizing the home loan, he wants to calculate the EMI amount to check whether it would be okay for him or not. On putting these details into the Home Loan EMI Calculator, the results that he got are mentioned below.
| Loan Aspects | Details |
|---|---|
| Required Loan Amount | INR 45 lakh |
| Rate of Interest | 8.50% per annum |
| Required Tenure | 15 years (180 months) |
| EMI amount | INR 44,313 |
| Interest Outgo @8.50% per annum | INR 34,76,390 |
| Total Amount Payable | INR 79,76,390 |
So, you can see that by feeding these details into the tool, the EMI amount that an individual will have to pay is INR 44,313. If you want to have a look at the principal and interest amount at different points in tenure, you can glance at the Amortization Table.
Table Showing EMI, Interest Outgo, and Total Repayment Amount
| Loan Amount | Interest Rate | Tenure | Monthly Instalment | Total Interest Amount | Total Amount |
|---|---|---|---|---|---|
| ₹ 45,00,000 | 8.50% | 1 | ₹ 3,92,489 | ₹ 2,09,868 | ₹ 47,09,868 |
| ₹ 45,00,000 | 8.50% | 2 | ₹ 2,04,551 | ₹ 4,09,213 | ₹ 49,09,213 |
| ₹ 45,00,000 | 8.50% | 3 | ₹ 1,42,054 | ₹ 6,13,941 | ₹ 51,13,941 |
| ₹ 45,00,000 | 8.50% | 4 | ₹ 1,10,917 | ₹ 8,24,034 | ₹ 53,24,034 |
| ₹ 45,00,000 | 8.50% | 5 | ₹ 92,324 | ₹ 10,39,463 | ₹ 55,39,463 |
| ₹ 45,00,000 | 8.50% | 6 | ₹ 80,003 | ₹ 12,60,197 | ₹ 57,60,197 |
| ₹ 45,00,000 | 8.50% | 7 | ₹ 71,264 | ₹ 14,86,191 | ₹ 59,86,191 |
| ₹ 45,00,000 | 8.50% | 8 | ₹ 64,765 | ₹ 17,17,400 | ₹ 62,17,400 |
| ₹ 45,00,000 | 8.50% | 9 | ₹ 59,757 | ₹ 19,53,765 | ₹ 64,53,765 |
| ₹ 45,00,000 | 8.50% | 10 | ₹ 55,794 | ₹ 21,95,227 | ₹ 66,95,227 |
| ₹ 45,00,000 | 8.50% | 11 | ₹ 52,589 | ₹ 24,41,717 | ₹ 69,41,717 |
| ₹ 45,00,000 | 8.50% | 12 | ₹ 49,953 | ₹ 26,93,160 | ₹ 71,93,160 |
| ₹ 45,00,000 | 8.50% | 13 | ₹ 47,753 | ₹ 29,49,477 | ₹ 74,49,477 |
| ₹ 45,00,000 | 8.50% | 14 | ₹ 45,896 | ₹ 32,10,584 | ₹ 77,10,584 |
| ₹ 45,00,000 | 8.50% | 15 | ₹ 44,313 | ₹ 34,76,390 | ₹ 79,76,390 |
EMI, Total Interest Outgo, Total Repayment (Interest + Principal)
| Year | Principal | Interest | Balance Amount |
|---|---|---|---|
| 1 | ₹ 1,55,213 | ₹ 3,76,546 | ₹ 43,44,786 |
| 2 | ₹ 1,68,933 | ₹ 3,62,826 | ₹ 41,75,853 |
| 3 | ₹ 1,83,865 | ₹ 3,47,894 | ₹ 39,91,987 |
| 4 | ₹ 2,00,117 | ₹ 3,31,642 | ₹ 37,91,870 |
| 5 | ₹ 2,17,806 | ₹ 3,13,953 | ₹ 35,74,064 |
| 6 | ₹ 2,37,058 | ₹ 2,94,701 | ₹ 33,37,006 |
| 7 | ₹ 2,58,011 | ₹ 2,73,748 | ₹ 30,78,994 |
| 8 | ₹ 2,80,817 | ₹ 2,50,942 | ₹ 27,98,176 |
| 9 | ₹ 3,05,639 | ₹ 2,26,120 | ₹ 24,92,537 |
| 10 | ₹ 3,32,655 | ₹ 1,99,104 | ₹ 21,59,881 |
| 11 | ₹ 3,62,058 | ₹ 1,69,700 | ₹ 17,97,822 |
| 12 | ₹ 3,94,061 | ₹ 1,37,698 | ₹ 14,03,761 |
| 13 | ₹ 4,28,893 | ₹ 1,02,866 | ₹ 9,74,868 |
| 14 | ₹ 4,66,803 | ₹ 64,956 | ₹ 5,08,064 |
| 15 | ₹ 5,08,376 | ₹ 23,695 | ₹ 0 |
How a Home Loan EMI Calculator Helps You in Prepayment Calculation?
Prepayment, also known as the foreclosure of the loan, and part-prepayment are two facilities provided by the lender that can help you in paying the loan amount before the fixed tenure. But it is important for any individual to make sure that he or she is getting an advantage by opting for this facility. And one of the best ways to know this is by using the Home Loan EMI Calculator.
With this tool, you can get help in your prepayment calculations. You must be wondering how you can decide whether opting for a prepayment facility would be beneficial for you or not? Well, let’s understand this through an example.
Suppose an applicant has a home loan of INR 25 lakh for 15 years at an interest rate of 9.75% per annum. When you will feed these details into the Home Loan EMI Calculator, you will find out that
EMI Amount will be INR 26,484
Total Interest Amount will be INR 22,67,132
And, the Total Amount Payable (Principal + Interest) will be INR 47,67,132
Let’s say the applicant wants to opt for a prepayment facility (foreclose the loan) after 8 years into the loan. At this point in tenure, you can see through the Amortization Table that he has the Balance home loan amount of INR 16,07,794. So, if the applicant prepays this full amount in one go, he could save a total interest amount of INR 6,16,868.
Total Interest Outgo part that you can save = INR 6,16,868
Suppose the applicant doesn’t want to pay the full amount in one go and instead, wants to only pay a portion of the balance amount. Let’s say he wants to pay INR 6 lakh after the end of eight years. By paying this amount, the balance amount would come down to INR 10,07,794.
Now, the applicant can pay this amount in the remaining tenure which makes the EMIs a lot lower than before. As now, the applicant will have to repay the loan amount of INR 10,07,794 in the remaining seven years.
EMI for this remaining loan amount will be INR 16,601
Interest outgo will be INR 3,86,663
And the total amount payable will be 13,94,457
So, by part prepaying the amount of INR 6 lakh, you can save INR 9,683 per month with the help of reduced EMI. So, with the help of the Home Loan EMI Calculator, you can know the prepayment calculations too, and make a better decision.
How to Choose the Right Loan Tenure with Home Loan EMI Calculator?
As you know that home loans are generally big-ticket loans and taken for a long period. That’s why when selecting the right home loan option, it is important to choose the right loan tenure. Lenders provide home loans for a maximum of 30 years. If you choose a longer period for your home loan, your EMIs will be lower. But if you want to reduce the interest outgo of your loan amount, you should choose the shorter tenure.
Let’s understand this through an example. In the below table, we are providing you the comparison between a home loan of INR 30 lakh at an interest rate of 8.00% per annum for 15 years and 25 years. On feeding these details into the Home Loan EMI Calculator, you will find the following results.
| Loan Aspects | Tenure | EMI Amount | Interest Outgo | Total Amount Payable |
|---|---|---|---|---|
| INR 30 lakh @8.00% per annum | 15 years | INR 28,670 | INR 21,60,521 | INR 51,60,521 |
| INR 30 lakh @8.00% per annum | 25 years | INR 23,154 | INR 39,46,346 | INR 69,46,346 |
So, you can see by yourself how EMI Calculator can help you in choosing the right loan tenure for your home loan. You can feed any values into this tool and make the right decision according to your repayment capacity.
