How to Use Home Loan Prepayment Calculator
Loans are repaid through EMIs or Equated Monthly Installments which is a set amount determined by the principal amount that is borrowed, the interest rate charged, as well as the repayment tenure chosen. The EMI amount can be fixed or variable throughout the term and will have to be paid by the borrower to the lender each month.
Our home loan interest rate calculator is tailored to be extremely user friendly. Follow the steps below to calculate your monthly EMI online and plan your finances effectively -
STEP 1: Enter the loan amount borrowed by using the slider to adjust
STEP 2: Enter the rate of interest that is imposed which can be adjusted by using the slider
STEP 3: Finally, enter the repayment period that is chosen in either years or months
That’s it! The EMI amount along with the repayment schedule will be displayed.
If quick and easy EMI calculation is what you’re looking for then the Money View home loan EMI calculator is perfect. You will no longer have to worry about miscalculating the EMI amount or worry about the correct formula to use.
Formula to Calculate Home Loan EMI
To calculate your home loan EMI manually, use the formula below -
E = [P x R x (1+R)^N ] / [(1+R)^N-1]
Where P stands for the principal amount that is borrowed
R represents the rate of interest imposed
N is the tenure in number of months
Let us understand this with an example -
Rs. 10,00,000 is the amount borrowed (P)
8% is the annual rate of interest imposed
3 years is the tenure (n)
Then the EMI to be paid using the above formula will be:
[10,00,000 x 0.00666 x (1+0.00666)^36] / [(1+0.00666)^36-1] = Rs. 31, 336
Therefore, the EMI for a Rs. 10 lakh home loan is Rs. 31, 336.
The rate of interest (R) is calculated monthly i.e. it is calculated as (Annual Rate of interest/12/100) in this case (8/12/100 = 0.00666)
The above formula can be used to calculate EMIs for all types of loans and not just home loans, unless mentioned otherwise.
EMI schedule or amortization schedule is a table that illustrates how your EMIs are paid each month and its impact on your principal and interest amount. Though your EMI remains the same throughout the repayment term, your principal and interest amount will reduce over time. This change is illustrated through an amortization table.
Given below is the table for the above example -
To help you understand the nuances of home loan EMI calculation, here’s an example for you -
Aditya and his wife wish to purchase a new flat that costs Rs. 20 lakhs. They wish to avail a loan with a repayment term of 20 years and an interest rate of 8.2%. Using the Money View home loan EMI calculator, they have found out that their EMI for 20 lakhs home loan for 20 years is Rs. 17, 041 per month.
Thanks to the home loan EMI calculator, Aditya can easily find out his EMI which will help him plan his finances effectively.
Did you know that the way interest is calculated can have an impact on your EMI? There are two ways of calculating the interest - flat balance method and reducing balance method.
Here is a quick comparison -
There are multiple factors that have an impact on the interest rate and subsequently the home loan EMI amount to be paid. Some of the important factors include -
Your credit score is a numerical representation of your creditworthiness. The higher the score, the better are your chances of availing of a loan as a high score indicates better repayment ability
Location and Value of the House
Houses that are in newer or upcoming areas are considered to be more valuable or those that have amenities close by. Loans for such homes can generally be availed at a lower interest rate
The Marginal Cost of Funds based Lending Rate is the minimum that a bank or financial institution can lend at. This is decided annually and depends on various factors such as operating cost, the marginal cost of funds, etc. The interest rate imposed will increase or decrease based on variations in the MCLR rate
Loan to Value or LTV Ratio
This is essentially the percentage of the property value that the loan can finance. The higher the loan amount availed, the higher is the rate of interest as the risk is greater for the lender
Employment Status of Applicant
Salaried employees or those with a steady stream of income can generally avail loans at a relatively lower rate of interest as the risk is much lower for the lender as compared to applicants who are self-employed
In addition to all of the above factors, the repayment term can determine the rate of interest imposed. Generally, a shorter repayment term leads to a lower rate of interest and vice versa.
Here’s why using home loan prepayment calculator is beneficial -
Knowing how much EMI to pay will help you plan out your budget. This in turn will ensure that there are no missed payments
Manual calculations leave a lot of room for error. Our instant home loan eligibility calculator will prevent such mistakes
Our home loan EMI calculator can help you save time and effort
You can access the home loan EMI calculator online easily from anywhere at anytime
Additionally, if you know how much you owe, you can avoid the hassles of missed or delayed payments which can severely hamper your credit score