What is the Formula for Calculate Home Loan EMI?
With readily available online calculators, we tend to forget about the situation wherein we might have to calculate EMI without the internet. Knowledge of the formula for calculating home loan EMIs is a must. Learn how to utilize your principal, tenure, and interest rate and determine what monthly amount you will have to pay to clear off your loan repayment. Want to save time? Use the EMI calculator home loan and discover the best home loans to fulfill your dream house plans.
Components of Home Loan
Before moving on to the home loan EMI formula, let’s understand the main components of home loan estimation.
Loan Principal (P)
Your home loan principal is the amount you borrow from a bank or NBFC. In other words, it is the portion of your property’s price that a bank or NBFC finances. Typically, this amount ranges between 80% and 90% of your home’s cost.
Let us take the following example to understand this better:
If you plan to purchase a house worth ₹1 crore, you can get up to ₹80 to ₹90 lakh from a financing institution.
The remaining portion, i.e., ₹20 to 10 lakh, will be borne by you as a down payment. You must remember that the loan principal is a critical element in the home EMI calculation. The higher the loan principal, the more your EMI will be.
Home Loan Interest Rates (R)
You must have come across this term often when borrowing a loan. Every financial institution charges a certain interest rate on every loan. The interest rate determines the amount you would pay in addition to the borrowed sum towards the clearance of your loan.
Home loan lenders rely on compound interest to determine the interest amount you would bear. You must always look for institutions that charge lower interest rates.
Loan Tenure (N)
Whether you use an EMI calculator home loan or manually calculate your EMI, you must enter the tenure. It is the time during which you will repay the borrowed sum along with interest.
Usually, the best home loans come with a tenure of 15 to 20 years. The maximum duration can go up to 30 years. Various factors, such as your age, creditworthiness, and income, determine your tenure.
When you use the EMI Calculator Home Loan, you will find that increasing the repayment tenure results in a decrease in your monthly repayment liabilities.
Formula to Calculate Home Loan EMI
Now that you know the main components involved in EMI estimations, you can manually calculate your monthly installments using the formula.
The EMI calculation formula is as follows:
Equated Monthly Instalments (EMI) = {P x R x (1+R)^N} / {(1 + R)^N – 1}
Here, P refers to the Principal amount, i.e., your borrowed sum, R denotes the interest rate when divided by 100, and N is the number of EMIs or the tenure in months. So, if your tenure is 20 years, then N will be 240.
Doesn’t the EMI formula appear complicated? It certainly is. Moreover, it is time-consuming. So, why not opt for an EMI calculator home loan and avoid this cumbersome process?
Speed Up Calculations With EMI Calculator Home Loan
A home loan EMI calculator is an online tool that enables borrowers to calculate their EMIs for home loan repayment. This easy-to-use tool requires you to simply enter the principal amount, interest rate, and tenure. Click the calculate button, and you will have an error-free result displayed within seconds!
Moreover, you also get details on what is the total payable interest and what would be the interest amount that you would pay each month. So, no more lengthy calculations for estimating your monthly outgo. Access accurate information with the free-to-use Home loan EMI calculator.
Conclusion
A home is one of the greatest assets that you will ever have, so it is of paramount importance to ensure that you make the right decisions when taking out a loan. Using an EMI calculator makes it easy to see the most effective way to find the best home loans for your budget and goals. You can compare loans from different banks at one go and carry out a detailed analysis of your requirements.