A home loan EMI calculator helps you figure out how much your monthly payment will be based on factors like the loan amount, interest rate, and loan duration. It also shows you the total interest and principal you'll pay over time, along with a schedule so you can plan your payments better.
Benefits of Using Home Loan EMI Calculator
Using a home loan EMI calculator helps you plan before applying for a housing loan. Here's what you can figure out:
- How much you can borrow for your home loan.
- How much to put towards your down payment.
- Whether a long-term or short-term loan is better for you.
- How to organize your finances to make sure you can pay back the loan on time.
How to Calculate Home Loan EMI
Consumers can manually calculate their home loan EMIs using the following formula:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1], where,
- P: Principal amount
- R: Interest rate (per month)
- N: Number of monthly instalments/loan tenure in months
Factors that affect Home Loan EMI
Interest Rate: A higher home loan interest rate results in a higher EMI and increases the total interest cost over the loan tenure.
Loan Amount: A higher borrowed amount means a higher EMI, assuming the interest rate and tenure are fixed.
Loan Tenure: Opting for a longer tenure reduces the EMI but increases the total interest paid over time compared to a shorter tenure for the same loan amount.
What are the Fees and Charges Applicable on Missing your Home Loan Installment(s)?
If you miss paying your home loan EMI(s) on time, you may face additional charges on top of the actual EMI. These charges include:
- Late payment charges: Can be a fixed amount or a percentage of the unpaid installment.
- Penal interest charges: Applied to the unpaid EMI amount. It's usually a fixed percentage charged monthly on the outstanding principal until the overdue EMI is paid.
- Cheque/NACH/SI bounce charges: Applied when your EMI payment fails due to insufficient funds or if the account used for EMI payments is closed. It's typically a fixed fee for each failed deduction.
How to Reduce Home Loan EMI?
If you're looking to reduce your home loan EMI payments, consider the following strategies:
- Opt for home loan balance transfer: Transfer your outstanding loan amount to lenders offering lower interest rates or longer tenures. Before making the switch, analyze the costs involved to ensure that the interest savings offset the transfer expenses. Utilize an online home loan EMI calculator to understand how much your EMIs can decrease with a lower interest rate.
- Make part prepayments: By paying off a portion of the principal early, you can choose to either lower your EMI or shorten the loan tenure. Opt for lower EMIs if you're struggling to make full payments. Typically, you can make part prepayments after a one-year lock-in period. Additionally, banks and NBFCs can't charge foreclosure penalties on floating-rate housing loans for individuals, except for business purposes.
Can My Home Loan EMI Amount Change During The Loan Tenure?
- Partly disbursed loan: For partly disbursed loans, pre-EMIs increase with each disbursement.
- Step-up or Step-down loans: With flexible EMIs like step-up or step-down loans, your housing loan EMI can change. In step-up loans, your EMI gradually increases over the tenure, whereas in step-down loans, EMIs decrease over time.
- Floating interest rate fluctuations: Changes in benchmark rates impact the floating interest rate. If the floating rate rises, the lender may increase the loan tenure while maintaining your EMI. If the new tenure exceeds the maximum permitted period, the bank may raise your housing loan EMI.
- Loan prepayment: Prepayments affect your home loan EMI. You can either reduce the EMI for the same tenure or decrease the tenure while keeping the EMIs constant. The latter is advantageous as it leads to lower interest payments. Use a housing loan EMI calculator to determine the exact interest savings.
