Learn How to Calculate EMI for Home Loans
Everyone dreams of having their own home. It is a part of the holy trinity of Roti-Kapda-Makaan in India. Thanks to reasonable home loans, it is a feasible reality for Indians. You can get a home loan from a bank or financial lender. You can use it to buy/construct/renovate a house. Home loans can have an adjustable or fixed interest rate. You can repay the loan in feasible Equated Monthly Installments (EMI). You can calculate the EMI using a housing loan EMI calculator. The loan must be repaid within a fixed time called loan tenure/term. Until then, the property’s deed belongs to the bank or lender.
What is Equated Monthly Installment (EMI)?
An EMI is the building block of loan repayment. It is a monthly amount paid by the borrower to the lender. Banks deduct this pre-decided amount from your chosen account every month. It is an automated way to repay your loan. You can also avail of tax benefits on home loan EMIs. However, the deduction does not stop even if you have financial problems. Even then, the bank will continue to deduct the amount. Banks deduct EMIs every month on a fixed date. They will continue to do this till the loan amount is repaid.
The EMI consists of a percentage of the principal amount and interest. In the beginning, the interest amount is higher. Every year, the amount to pay will decrease. Towards the end of the tenure, the principal amount is lower. Regardless, the EMI remains constant throughout the tenure.
However, you can pay more than the decided amount on EMIs in a month by discussing this facility with the bank. Most people prefer to do this when their income increases. The EMI can also change in exceptional cases. For example, when you repay a huge chunk of the loan. In such cases, the EMI decreases.
What is a Housing Loan EMI Calculator?
Thanks to the Digital India Campaign, banks have become digitalized. Banking has since bid farewell to manual calculations for loan EMI. A housing loan calculator is an online tool that calculates the monthly EMI.
Most banks have such calculators on their official websites. However, the EMI figures are an estimate, not the final amount. You must use them as a general self-help planning tool. You will have to negotiate the exact terms with the bank.
How to use a Housing Loan EMI Calculator?
Every bank’s home loan calculator in India uses the following formula:
EMI = [P x R x (1+R) ^N]/[(1+R) ^(N-1)]
EMI: Equated Monthly Installment
P: Principal/loan amount
R: the monthly interest rate. You can find it using the bank’s annual interest rate. You have to divide the annual rate by 12 to get the monthly rate.
N: Number of monthly installments or the loan tenure in months
*This formula does not include the loan processing fee of the bank.
Visit any bank’s website to use an online housing loan EMI calculator. You will need to input details such as the desired loan amount, loan tenure, and yearly interest rate.
Instantly, the calculator displays your monthly EMI. It also displays the interest and total amount to pay. You can change the inputs to customize your home loan. This is a great way of planning your loan.
Benefits of using a Home Loan EMI calculator
The biggest benefit is finding out the EMI. Other benefits include:
- Learning whether your tenure should be long or short-term.
- The calculations are not prone to human error.
- You can plan your finances in advance.
- You can use them anywhere, anytime, at your ease.
What is a Housing Loan eligibility calculator?
You can know your loan eligibility with a few taps on the keyboard because banks now have digital banking products. Simply access the bank’s online home loan eligibility calculator. You need to input your income, i.e., your capacity to repay. Using these, you can determine the loan amount you are eligible for. This loan amount is necessary to determine the EMI. Other factors include age, credit score, financial history, etc. The loan amount will increase if you increase the tenure. It will also increase if you add an extra source of income.
Minimum Home loan eligibility criteria
Whether you are eligible for a home loan depends on the following:
- Your current age and for how many more years you can work. The age limit is as follows:
| Type of revenue stream | Age Limit for loan |
| Salaried Individuals | 18–70 years (depending on the bank) |
| Self Employed | 18–70 years (depending on the bank) |
- Your monthly salary or yearly business income.
| Type of revenue stream | Minimum income |
| Salaried Individuals | ₹10,000–₹40,000 per month (depending on the bank) |
| Self Employed | ₹2 lac–₹6 lac per annum (depending on the bank) |
- The time required to repay the loan or loan term. The duration of the loan term cannot exceed 30 years.
- The present and future income of loan applicant(s). It dictates the loan amount you can get.
- Timely credit repayment makes you more eligible. Credit Information Bureau of India Limited is India’s largest credit rating agency. A CIBIL score of 750 or higher improves the chances of loan approval.
- Existing liabilities such as a vehicle loan, credit debts, etc.
Conclusion
House loan calculators are great tools for planning a loan. You must also use a housing loan eligibility calculator to know the loan amount. Improve your credit score and repay short-term debts to increase it. Use this amount and loan tenure to find out the EMI. Knowing your EMI is a must when planning finances. All these banking tools are available online and are easy to use. So go ahead and plan to get your dream home loan.