How to Calculate EMI on Your Home Loan

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Repaying the home loan EMIs on time requires proper financial planning. Read on to know how you can calculate the EMI.

Getting a home loan is one of the best ways to accomplish your dream of being a homeowner. Today, many lenders in India offer home loans at competitive interest rates. And, while borrowing is easy, repaying it can be challenging. It is a long-term loan that extends for 15-30 years. This means, as a borrower, you are indebted for such long periods to pay the EMIs.

The EMI includes both the principal amount and the interest component. And, to ensure that you don’t default on the repayment, the EMI amount must be affordable. This is where the home loan EMI calculator comes handy. It is a free online tool that you can find on all lender websites. Let us know more about home loan EMI calculator and how to calculate the EMI on home loan.

What is a home loan EMI calculator?

A home loan EMI calculator is an online that helps loan borrowers compute the exact EMI amount payable against the amount borrowed in advance. The calculator has three important components, including:

  •         The principal amount (the amount you wish to borrow)
  •         The loan tenure (the duration for which you want to borrow)
  •         The interest rate (the rate of interest levied by the lender)

By using the calculator, you can know the EMI amount you must repay every month to the lender over a stipulated tenure and at a specific interest rate. While using the home loan EMI calculator, you can change your input many times and try different permutations and combinations of interest rate, tenure, to determine an affordable EMI.

How does the home loan EMI calculator work?

To calculate the monthly home loan EMI, you can either enter the details or you can use the slider provided in the calculator and adjust the values for principal amount, tenure, and interest rate depending on the type of calculator available on the lender’s website. Based on the input you provide the calculator will automatically do the calculations and show the EMI amount payable within a few seconds. You can keep changing the values and adjust the sliders until you think EMI is affordable.

Formula for calculating home loan EMI

Most EMI calculators use the following formula to calculate the EMI:

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

 In the above formula,

EMI is the equated monthly income or the amount that you must repay every month

P is the principal amount or the amount you borrow

R is the interest rate levied by the lender

N is the loan duration or the number of instalment you must pay till the end of the loan term

Benefits of using EMI calculator

It helps you to know the break-up for various charges such as the processing fees, stamp duty, total interest payable associated with your home loan. Since these charges are a substantial amount, knowing the actual value will help you understand the exact loan cost.

Calculating the home loan EMIs manually with pen or paper or using excel sheets can be complex. Also, there is always a risk of committing human error, which can put off your financial calculator. To avoid such hassles and mistakes, it is better to use the home loan EMI calculator. It gives you accurate results within a few seconds. You can adjust the values you enter in the calculator multiple times and be rest assured that the results are 100% accurate.

Different lenders offer home loans at different interest rates. Even if the loan amount differs by 0.02%, it can reduce the EMI and help you save a significant amount in the long run. The EMI calculator allows you to easily compare the interest rate offered by different lenders and make an informed borrowing decision.

Lastly, since the home loan EMI calculator allows you to  know the exact EMI amount payable to the lender beforehand, you can plan your finances accordingly and make your budget keeping the EMI amount in mind.