How to Calculate EMI from a New Home Loan Interest Rate

A home loan EMI calculator can be a useful tool for borrowers when calculating the Equated Monthly Installments (EMIs) as it provides a clear idea of the amount that needs to be paid each month. Calculating the EMIs help borrowers make an informed decision so they can plan their repayment accordingly. Read on to know how to calculate EMI for a home loan using an online calculator. 

All You Need to Know About a Housing Loan Calculator 

The housing loan calculator is an online tool that lets you assess your monthly EMIs along with the total payable interest and principal throughout the repayment tenor. For this, the borrower only has to access the calculator and enter the loan amount, home loan interest rate, and the loan tenor. Based on a mathematical formula, the calculator provides the estimated EMI value along with a detailed breakup of the principal and interest.

How to Calculate EMI for Home Loan 

Home loan EMI is calculated based on the following formula –

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

Where,

EMI = Equated Monthly Installment
P = Principal amount,
R = Rate of Interest per month (the annual rate of interest is divided by 12 to get the monthly rate of interest), and
N = Number of installments or loan tenure 

It is to be noted that the above formula does not take into account any housing loan processing fee. 

Illustration – 

Mr. Vinay borrowed a housing loan amount of INR 4,500,000 (Principal) at an 8.75% rate of interest p.a. for 30 years. 

Applying the above formula to calculate home loan EMI, one would get the following result –

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

        = [4,500,000 x 8.75 x (1+8.75)^30]/[(1+ 8.75)^30-1]

        = 35,402

Therefore, the Equated Monthly Installment is INR 35,402.

Principal Amount = INR 45,00,000
Total Interest Payable = INR 82,44,547

Benefits of a Home Loan EMI Calculator

An online home loan calculator comes with several advantages, as listed below –

Easy and Convenient

Using a home loan calculator is very easy and convenient as you only have to enter the values (loan amount, interest rate and tenor) in the required fields. It does not involve manual, complex calculations since the values are determined on the basis of the mathematical formula. Thus, there is no room for errors or miscalculations. It ensures faster results with 100% accuracy. 

A Complete Breakup of the All Charges

The online tool helps borrowers get an idea of the financial charges, like total interest payable and processing fees associated with the monthly installments. Since financial institutes and banks display the charges as a percentage of the loan amount, knowing the real value would help understand the actual loan cost.

Comparison Between Various Loan Offers

The housing loan calculator can be used to compare various loan offers from different banks. A comparison between the various loan offers will help results will show you the total cost of each loan along with their respective EMIs. This will help you narrow down on the most feasible option.

Opting for a Suitable Tenor

Being aware of the home loan EMIs ca also help borrowers pick right repayment tenor. If one can afford to pay a higher monthly installment, one may opt for a shorter tenor and repay the amount at the soonest. However, if you wish to opt for comfortable EMIs, you may want to go for a longer tenor to allow enough time for easy repayments.

Aids in Information Validation

When negotiating a home loan deal, borrowers can verify the repayment schedule that outlines all the details from the housing loan calculator. However, one must keep in mind that the numbers are likely to differ as lenders often include certain other charges and fees in the EMI calculation.

Aids in Loan Management

While paying the EMIs, one may use some extra funds to make the prepayments. The home loan calculator can be used to assess the prepayments that can prove helpful in paying off the loan amount early.

When evaluating EMIs using a home loan calculator, make sure you take all the parameters into consideration, such as the principal interest rate, repayment tenor, prepayments, processing fee etc. Once you know how to calculate EMI for home loan, get in touch with a lender who has a good market reputation. Bajaj Housing Finance is one of the top lending institutions offering the best EMI options and easy access to a housing loan calculator.