What is a Home Loan EMI Calculator?

The first thing that comes to your mind while availing of a home loan is the loan repayment schedule and the amount of expected EMI that will be deducted each month from your regular pay. A home loan EMI is a fixed amount paid to the lender until the repayment of the entire loan amount is complete along with interest payable and part amount of the principal amount.

The home loan EMI calculator requires a few basic inputs:

1. Your loan amount
2. Your loan tenure
3. Interest rate

Based on the three parameters mentioned above, the home loan EMI calculator gives you an estimate of the EMI you need to pay the financial institution each month.

EMI = principal amount + interest paid on loan.

Features of the Home Loan EMI Calculator:

Let’s take a look at its important features:

1. The home loan EMI calculator helps you calculate your home loan EMI amount which is near accurate (actual EMI will also include a few minor components such as insurance, etc.) .
2. The calculator asks for specific information the amount you wish to avail, the repayment period, and the interest rate per annum.
3. EMI home loan calculators do not consider imperatives like local, state taxes, and insurance.
4. The calculator helps you analyse your Amortisation Schedule, which is the detailed segregation between the principal amount and interest and the remaining balance of the home loan each month.

Why Should You Use Home Loan EMI Calculator?

Before you apply for a home loan, calculating home loan EMI using the calculator will help you in deciding:

• How much money you can borrow given your monthly budget to allow for EMI payments
• If you should opt for a long-term or a short-term home loan

• Helps you plan your finances to ensure timely loan repayments
• How the home loan EMI calculation is done

You need the following information to calculate the home loan EMI:

• E: Equated Monthly Installment,
• P: Principal or loan amount,
• R: Monthly rate of interest
• N: Number of monthly instalments.

Formula used for calculating EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

Example

Mr X borrowed a home loan amount of Rs. 35,00,000 (Principal amount or P) at an interest rate of 8.65% p.a. The tenure of the loan is 360 months or 30 years

P = 35,00,000

R = 8.65%

N = 30 years or 360 months

Interest Rate Applied = 8.65%

Applying this formula EMI = [P x R x (1+R)^N]/[(1+R)^N-1], his monthly EMI comes out to be = Rs 27,285

EMI to be paid for one whole year = Rs 27,285 * 12 = Rs 327,419

Benefits of Home Loan EMI Calculator

The advantages of using a home loan EMI calculator are listed below:

• It offers an easy, simple, user-friendly, and convenient process to compute monthly home loan EMIs without needing professional assistance.

• You can use this application to compare various loan offers and narrow down on the most feasible option.
• You can choose the right tenure of the loan.
• You can better plan  your home loan

Factors Considered While Calculating Home Loan EMI

Let’s take a look at the various factors that are considered while calculating monthly repayments:

1. The principal amount is the loan amount you need to borrow from the lender. The higher the principal amount, the higher will be the EMI.
2. Interest rate is the cost of your loan and may vary. The lower the rate of interest charged, the lower your EMI will be.
3. The tenure is the time taken to repay the loan, which is inversely proportional to the EMI. The longer the loan tenure, the lower your EMI.
4. Prepayments help you reduce the interest charges and the outstanding principal and eventually lead to a lower EMI.

Conclusion

It is prudent to use an effective home loan EMI calculator to estimate the monthly charges you will need to pay each month, even before you apply for a home loan. It will help you keep track of your finances and will be highly beneficial in the long run.