How To Use A Home Loan Emi Calculator?

By Author: Anil
Total Articles: 9
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A home loan has high value. It often lasts for two decades and keeps the indebted borrower paying the principal and interest amount until the tenure. Since the purpose and amount of loan are essential, one must consider their finances and affordability while finalising the loan. They should be ready and comfortable to realise that a fixed portion of their income will go towards paying the equated monthly instalments (EMI) for years together.

To understand the nature of the EMIs, they can utilise tools available online for free, such as the home loan EMI calculator. It offers unlimited usage that helps borrowers calculate the payable EMI amount against the home loan. There are three components: Principal Amount, Loan Tenure, and the Interest Rate. The borrower understands the payable EMI over a stipulated tenure at an interest rate determined on the loan amount and term.

They may input multiple values and combinations of tenures or interest rates to determine an affordable EMI. They can also enter different principal loan amounts (by adjusting the down payment), interest rates and terms and record the payable EMIs ...
... based on these figures. Here is the mathematical formula:

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

EMI is the equated monthly instalment

P is the principal loan amount, i.e. amount borrowed as loan

R is the rate of interest (fixed or floating) on the home loan amount

N is the repayment tenure or the number of instalments to be paid every month

Principal loan amount: It is the actual sum which the borrower accepts to buy a home. For instance, if the house’s cost is INR 1 crore, and the affordable down payment value is 25 per cent of the total cost, and the principal loan amount is INR 75 lakh. The lender applies the interest rate to the principal loan amount and determines the EMI amount based on the tenure.

Interest rate: Every borrower must pay an interest rate on the sanctioned loan amount. Each lender offers varying interest rates. While calculating the EMI on the home loan calculator, consider the chosen lender’s interest rate and input the figures accordingly. Most of them offer home loans with a fixed or floating interest rate of 8.50 per cent and above.

Tenure: Enter the loan tenure in months on the EMI calculator for home loan. Since home loans have high values, they are available for durations lasting anywhere between 15 to 20 years with high-interest rates.

Anil is a financial expert with over 5-plus years of experience in investment banking. In his free time, he writes on Demat. Here, he has explained How to use a home loan EMI calculator?