|Interest Rate||9.5 %|
|Monthly Instalment (EMI)||18643|
|Total Interest Amount||2474230|
|Total Amount (Principal + Interest)||4474230|
Everybody aspires to 'own' their home one day. With this objective, a person looks forward to avail an appropriate home loan which suits his/her monthly budget. As home loans offered by banks and housing finance institutions vary, so it becomes necessary to look for the interest rates and loan tenure which plays a major role in determining the EMI(Equated Monthly Installment) that he/she will have to pay from the monthly salary. However, EMIs usually constitute 40% of an applicant's net salary intake for disbursing the higher amount of loan.
The overall profile of an applicant needs to be assessed by the banks/NBFCs, before deciding the interest rates and the tenure. Based on which home loan would be sanctioned. Subsequently, one can calculate the results and verify it by using the Home loan EMI Calculator.
Now, what is a Home Loan EMI? Home Loan EMI is the monthly repayment amount the borrower needs to pay the lender every month as a part of the repayment process over a specified term-either at fixed or floating rate whichever is decided.
EMI Calculator is the tool to calculate the monthly installments of a loan that need to be paid to the institution as a repayment towards the borrowed sum. EMIs are used to pay off both interest and principal each month over a prescribed number of years, until the loan is paid-off in full. This will help the individuals to gauge their budget when looking to buy their dream home.
Now, let us take an example to understand about the calculation of home loan. Assume that a person looking for a home loan has the below requirements available :
Loan Amount - ₹ 25,00,000/- Tenure - 20 years and Interest Rate - 8.50% p.a.
On the basis of this data, the monthly installments that the borrower will have to pay is:
Table for EMI per month, Total Interest Outgo and Total Amount
|Loan Amount (In ₹)||Tenure (In Years)||Interest Rate (In % p.a.)||EMI (In ₹)||Total Interest (In ₹)||Total Payment (Principal+Interest) (In ₹)|
|Year||Principal (In ₹)||Interest (In ₹)||Balance Outstanding (In ₹)|
EMI calculator has many advantages and some of them are as follows:
Easy determination of EMI amount : The home loan EMI Calculator is helpful in determining the EMI amount. Just by entering the basic inputs such as loan amount, rate of interest and the loan term, will show a detailed result which includes the EMI amount likely to be payable by the borrower.
Saves time : Home loan EMI Calculator saves the borrower's time from getting involved in the lengthy and time-consuming calculations. Instead, EMI calculation for a home loan can be done within seconds. By the time whenever details are entered with reference to a home loan, the EMI calculator shows the Home Loan EMI immediately.
Provides authentic results : Calculation of EMI for a home loan manually involves many calculations and can often give wrong results. Wrong calculations can lead to changes in home loan EMIs, resulting in making a wrong decision while choosing the home loan. Therefore, manual calculations cannot be preferred. It is always wise to use a Home Loan EMI calculator for getting the right results.
Provides categorization of various finance charges : Home Loan EMI Calculator shows the understanding of various financial charges such as total interest paid and processing fee value. However, the banks and financial institutions show them as a percentage of the principal amount in order to reach out the actual value which would be helpful in deciding the terms of the loan.
Comparison of Loan Offers : With the help of home loan calculator, the financials involved in loan offers by various banks can be compared. Just provide the required inputs on the basis of an offer made from various banks, get the results, collect it at one place and compare. The borrower can then decide the most feasible loan offer amongst several banks and then sign up for getting the lowest rates and charges.
Ascertainment of loan tenure : The tenure of the loan can be decided once the EMI value is known to the borrower. It will help the borrower to choose various other combinations of available tenures and select the appropriate terms that accommodate his/her monthly income and budget. The shorter term means a higher EMI, while the longer term reduces the monthly installments paid towards home loan.
Easy Management of Loan : If a borrower is in the process of repaying a home loan and would like to re-consider the financials in order to pay-off the loan before the loan tenure ends, using the EMI calculator helps in formulating the decision in this regard.
Makes Validity in Information : For negotiating a home loan deal with the bank, it is essential to verify the schedule provided by the bank. The borrowers can use the EMI calculator for getting the amortization table which can also help them to cross-check with the bank and get it clarified.
The following are the parameters on which home loan EMI is calculated:
Loan Amount : The amount of money borrowed for the purpose of buying a house is called home loan amount. The borrowed amount depends upon the cost of the property and the repayment capacity of the borrower. One should remember that a lender can only give 80% of the property value as loan. This is called the principal amount of the loan and the interest rate applied on it. The final amount(calculated after applying the interest rate) is then divided equally across the tenure of the loan. The borrower can enter the amount which needs to be borrowed into the EMI calculator.
Interest Rate : This is the rate which is levied on the lending amount to the borrower. The interest rates for home loan varies from one financial institution to another. It is essential for everyone to check the interest rates before applying for a home loan. Interest rates are divided into two categories-fixed rate and floating rate. In case of fixed interest rate, the interest rate remains unchanged throughout the loan tenure and all EMIs remain equal. However, in the case of floating interest rate, the rates vary with any change in the base rate and accordingly, the EMIs fluctuate.
Tenure : The time duration taken by the borrower for repayment of the loan is known as tenure. Most of the home loans come with flexible loan tenures. In general, a home loan tenure varies from 5-20 years with some banks allowing up to 25 years and in some cases even continuing up to 30 years. The borrower is required to choose a loan tenure as per their choice, but always remember that longer the tenure, the more interest will have to be paid on the sanctioned home loan.
Pre-payments : It is common to see that many home loan borrowers want to settle their home loan installments as early as possible. Therefore, it reduces the interest burden thus overall cost of property. The pre-payment facility is given to the borrowers to clear their major installment payments before the maturity of their home-loan. Pre-payment is also available in the form of part or full settlement for settling out the debt of increasing EMIs or shifting to another loan( which is called foreclosure) with the same company.
Home Loan EMI Calculator is very simple to use. Just enter the following details :
After entering the above details, move the sliders either to the left or right for adjusting the value or directly type the values.
The calculation in the EMI calculator is done through the below-given formula:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
EMI= Equated Monthly Installment
P= Principal Loan Amount
R= Monthly Interest Rate
N= Number of Monthly Installments
Amortization is the process of reduction in the value of an asset or the balance of a home loan by a specific periodic amount. At the time of EMI payment, there is some portion of principal amount which also needs to be paid. The principal is the actual amount of loan which the borrower has to pay. However, by making regular periodic payments, the principal tends to decrease and gradually comes to zero.
An amortization schedule is a tabular display of periodic payments made towards a home loan. It consistently shows the loan repayment process in a tabular form. When you pay an EMI, a portion of it goes towards the principal amount and a portion towards the interest part of the loan amount. The percentage of EMI which goes towards the interest component along with the principal can be ascertained by an amortization schedule. Every EMI paid is divided between interest and principal amount of the loan. But, the exact amount going towards the principal component each time differs and the remaining amount goes to the interest component. At the beginning of the loan tenure, a substantial amount of EMI goes to the interest. As the home loan matures, a higher portion of EMI goes towards the principal. The home loan EMI calculator is not scheduled to provide you with the bank's amortization schedule.
A home loan amortization schedule consists of all the essential information relating to the home loan repayment such as loan amount, period of scheduled payments, and outstanding balance. It further gives the home loan EMI breakup, giving the detailed information regarding the repayment of interest and the outstanding principal of the loan. The amortization schedule assists the borrowers in making decisions associated with prepayment or refinance of loan and also gives details of interest for getting tax exemptions.