Home loan is the loan which is taken from any financial institutions to buy a dream house of your own. Home loan is basically a longer tenure loan so you need to pay your home loan EMIs for quite a long duration of time.
So, before applying for a home loan, one needs to know what exactly a home loan borrower needs to pay his lender as a part of EMI on his loan.
EMI or (Equated Monthly Installments) is the term used for the monthly payment made by a borrower to the lender towards interest and principal money borrowed subject to specific terms and condition of the lender.
Home Loan EMI amount depends on the following factors
A Home Loan EMI Calculator is a handy tool that helps one to calculate the monthly amount payable to the lender every month. In order to calculate the EMI applicable on your home loan amount, you need to use three factors which are principal Amount (P), Time duration (N), and Rate of interest (R) to know the exact amount of EMI on your loan amount.
1) Amount of Loan: Home loan EMI depends on the amount of loan you have borrowed from your lender. Your EMI increases with the increase in the loan amount.
2) Tenure of the Loan: This is another important factor on which your home loan EMI depends. This is the time for which you have taken the loan. The EMI decreases with the increase in the tenure of the loan.
3) The rate of interest: This is the rate at which interest is charged on the principal loan amount. The interest rate varies according to the type of loan taken and the lender with which you apply for your loan. Before opting for a home loan, a borrower is required to contrast and compare several rates of interest across banks before opting for a home loan.
Easy Ways to calculate your Home Loan EMIs
1) Calculate your EMI Using a Mathematical Formula
You can use this formula to calculate EMI on your home loan-
EMI = [P x R x (1+R) ^n] / [(1+R)^ n-1] Where, P= Principal loan amount, R= Rate of interest, n= Number of monthly instalments.
Assuming, P= Rs. 6 lakh R= 8.65% per annum = 8.65/12= 0.72 per month, N= 5 years
EMI=((600000*0.72 /100*(1+0.72 /100)^5/((1+0.72 /100)^5-1))) = Rs. 12,353
Therefore, by using an online home loan EMI calculator, one will be able to determine the exact amount of EMI that he needs to pay to the lender each month. So, it is quite a handy financial tool when you plan to opt for a housing loan. You can make use of an available online loan aggregators platform to check your home loan eligibility and EMI amount and accordingly apply for the loan to meet your need.
2) Calculation of Home Loan using Excel
One may also calculate the amount of EMI on housing loan by using an excel sheet and making use of a simple formula in the excel sheet to start your EMI calculation. The formula is
RATE stands for rate of interest
NPER stands for loan tenure
PV stands for present value
FV stands for future value
TYPE is zero or 1 that indicates when the payment is due by the borrower