Taking Home Loan? Here's How To Calculate EMI
A home loan EMI calculator helps to find out the monthly amount you need to pay every month and plan your repayment better.
In India, a home is considered more than an asset as it symbolises emotional security, family pride and social status. Buying own house remains a top priority for most Indians despite the financial challenges.
To fulfil this dream, many people opt to go for a home loan, either through banks or non-banking financial companies. These institutions offer loans based on various eligibility criteria like income, credit score and age.
Typically, the repayment is done through equated monthly instalments, making it manageable over a pre-defined tenure. It is important to note that the property's value affects loan approval and usually, around 80% of the home's value is financed.
The eligibility to secure these loans depends on a range of factors, including income and credit score. The applicant will need to submit their details, such as monthly income, loan tenure and interest rate, to check how much loan they may qualify for. The online home loan, EMI calculators can be helpful if you are planning to apply for a home loan.
A home loan EMI calculator helps to find out the monthly amount you need to pay every month and plan your repayment better.
For instance, the HDFC home loan calculator shows that for a 30-year-loan period at an 8.5% interest rate per annum, someone with Rs 1 lakh monthly salary is eligible for an amount up to Rs 65 lakh. In addition to the income, the loan amount may also vary depending on the loan tenure and interest rate.
Generally, home loan interest rates start at around 8.5-9%. Apart from the interest rate, the home loan EMI amounts could vary depending on the amount you want to borrow and the loan tenure.
How To Calculate Home Loan EMI?
Many lenders offer online EMI calculators to estimate your total outgo for home loan repayment. The EMI calculator shows a complete breakup of the principal and interest amount you have to pay over a predefined period.
While using the home loan EMI calculator, you need to enter three important details — loan amount, loan tenure and the interest rate.
So, while calculating the home loan EMI, it's important to choose the right tenure and loan amount as per your needs as well as your ability to pay off the loan. If you choose a longer tenure, the EMI amount will go down, but the overall interest rate will increase.
On the other hand, a shorter tenure will increase the monthly outgo, but the payment for the interest component will be lower. It's also advisable to compare various loan offers and choose the one that offers the lowest interest rate. Your EMIs may also change if you opt for a floating rate home loan.
Let's understand the home loan EMI calculation through an example:
If you are looking forward to applying for a loan of Rs 50 lakh, the EMI will be Rs 43,391 every month at an interest rate of 8.5%.
Principal amount: Rs 50 lakh.
Interest amount: Rs 54.13 lakh.
Interest rate: 8.5% per annum.
EMI: Rs 43,391.
Even though lenders may finance a large part of the property's value, it's advisable to reduce debt by making a substantial down payment. This will lower EMIs and overall interest burden. It's also advisable to evaluate EMIs for different amounts and tenures to choose the best loan offer and a hassle-free repayment.
