One of the most significant decisions we make in life is purchasing a home. Taking a home loan can be a way to finance the purchase. People take a home loan because they cannot afford to pay for a home in one go. A home loan is a significant long-term financial commitment that has to be carefully planned and assessed. The Equated Monthly Instalment (EMI) calculation is one of the most essential parts of a home loan. In this article, we’ll explain how to figure out the house loan EMI and the purpose of the home loan EMI calculator in India.
What is a home loan EMI?
The EMI is the sum a borrower must pay each month to pay off a home loan. The principal amount and the interest charged make up a monthly amount in the form of an EMI. The EMI remains fixed for the entire loan tenure and the borrower needs to pay the EMI during the loan tenure on a monthly basis.
How to Calculate an EMI for a House Loan in India?
You need to get an answer to the question – how much loan can I get? and calculate the EMI you need to pay each month to repay that loan. You can use a formula or an EMI calculator to figure out the EMI for a loan.
EMI Calculator
A home loan EMI Calculator India is an online tool that helps you calculate the EMI amount, on the basis of the interest rate charged, tenure of the loan, and the loan amount. To get the results, you must choose the loan amount, loan tenure, and interest rate. The calculator will give you an idea of the amount you need to pay for your monthly EMIs.
Here’s how to calculate the home loan EMI using an EMI calculator:
Step 1: Visit the official website of any reputed financial institution to find an online EMI calculator.
Step 2: Choose the loan amount, tenure, and interest rate.
Step 3: Click on the ‘Calculate’ button.
The calculator will display the monthly EMI amount that needs to be paid.
Formula to Calculate Home Loan EMI
If you prefer to calculate the EMI manually, you can use the following formula:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Where, P = Loan amount
N = Loan tenure in months
R = Interest rate charged
Factors That Affect Home Loan EMI
The home loan EMI depends on several factors, such as –
- Loan amount: The higher the loan amount, the higher the EMI.
- Loan tenure: The longer the loan tenure, the lower the EMI amount.
- Interest rate: The higher the interest rate, the higher the EMI.
- Type of interest rate: The EMI varies based on whether the interest rate is fixed or floating.
How to Reduce Home Loan EMI Amount?
Here are some ways to reduce your home loan EMI:
Increase the Down Payment
The down payment is the amount you pay upfront when buying a home. A higher down payment means a lower loan amount, hence, a lower EMI amount.
Opt for a Longer Tenure
The loan tenure is the time period during which you need to repay the loan. The longer the tenure, the lower the EMI amount.
Opt for a Lower Interest Rate
The interest rate is a primary factor that determines the EMI amount. Opt for a lending institution that offers a lower interest rate to get a lower EMI for your loan.
Opt for a Fixed Interest Rate
A fixed interest rate ensures that the EMI remains constant throughout the loan tenure, irrespective of market fluctuations. This provides stability making it easier to plan finances.
Prepay the Loan
Prepaying the loan means making additional payments towards the principal amount, which reduces the outstanding loan amount and hence, the EMI. However, a prepayment may sometimes attract a penalty, so check with your lender before making any additional payments.
Conclusion
Calculating the home loan EMI is an essential aspect of home buying. It helps you get an idea of what amount you need to pay monthly and plan your finances accordingly. Use an EMI calculator to calculate the EMI and consider ways to reduce the EMI, such as increasing the down payment, opting for a longer tenure, or switching to a lower interest rate. With careful planning and analysis, you can make an informed decision about your home loan and ensure that you repay it without any financial instability.