What is Home Loan EMI?
A home loan is a loan you get from a bank or non-banking financial company (NBFC) to purchase a house. Home loans are one of the most significant and popular loans available today. Owning a house is a wise decision as property values continue to rise, making it beneficial for both homeowners and investors.
When you take a home loan, it is usually for a large amount and a long duration. The bank or financial institution charges interest on the loan amount. The home loan EMI consists of both the principal amount and the interest and remains fixed throughout the loan tenure.
What is a Home Loan EMI Calculator?
The Home Loan EMI Calculator is a tool that helps you calculate the Equated Monthly Installments (EMIs) you need to pay for your home loan. This calculator uses the principal amount, interest rate, and loan duration to determine the monthly EMIs.
It features a box with three sliders: ‘Loan Amount,’ ‘Loan Tenure,’ and ‘Interest Rate.’ By entering the relevant details, you can find out how much EMI you need to pay each month to repay the home loan within your chosen tenure.
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How do Home Loan EMI Calculators Work?
You can calculate your home loan EMI amount using a mathematical formula:
EMI Amount = [P x R x (1+R)^N]/[(1+R)^N-1], where P, R, and N are the variables. Changing any of these variables will affect the EMI value.
Let’s discuss these variables in detail:
P represents the ‘Principal Amount,’ which is the original loan amount provided by the bank. The interest is calculated based on this amount.
R stands for the rate of interest set by the bank.
N denotes the number of years for which the loan is taken. Since EMIs are paid monthly, the duration is calculated in terms of the number of months.
For example, let’s assume you take a home loan of Rs 50 lakh with an average interest rate of 12% for a tenure of 10 years. The approximate EMI would be calculated as follows:
P = Rs 50 lakh, R = 12/100/12 or 0.01 (converted to months), N = 10 years or 120 months
EMI = [5000000 x 0.01 x (1+0.01)^120] / [(1+0.01)^120-1]
The calculated EMI amount would be Rs 71,735.Home loan EMi Calculator