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How to Calculate Home Loan EMI using a Housing Loan EMI Calculator

Housing Loan EMI Calculators are an effective means to computed our Home Loan EMI according to our financial restrictions as levied by the institutions. Click here for more info - https://www.indiabullshomeloans.com/

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How to Calculate Home Loan EMI using a Housing Loan EMI Calculator

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  1. How to calculate Home Loan EMI using a housing loan EMI Calculator

  2. If you are planning on building your dream house, definitely you are also planning for your housing loan. When it comes to home loans, certain terms like principal, interest, EMI etc are always associated. Here's all you need to know about EMIs right from the basics and how the entire system of housing loan EMI calculator works actually.

  3. What is Home Loan EMI? • EMI is the abbreviation for Equated Monthly Installments. • It is a fixed amount of money that the home loan borrower has to pay the lender every month until the loan is fully repayed. • This overall amount involves the principal home loan amount as well as the amount paid as interest. • The rate of interest and tenure is fixed during the home loan agreement. • This may be subject to various offers and schemes introduced by the bank during the entire home loan schedule.

  4. How is Home Loan EMI computed • Home loan EMI calculator uses the formula [P x I x (1+I)^N]/[(1+I)^N-1] where P is the loan amount or Principal, I is the rate of interest an N is the number of installments. • Suppose, you take a home loan of Rs 1,00,000 at 12% per annum interest rate with a tenure of 12 months. • Then, according to the home loan EMI calculator, you have to pay a monthly installment of Rs. 8,885 out of which Rs. 6,619 is the total interest amount.

  5. Principal and Interest rate on the Home Loan • If you are assuming that the interest and principal amount for the home loan is paid in equal parts during the entire tenure, then you are mistaken. • If you observe the housing loan EMI calculator formula closely, with a little mathematics, you can find out that the interest component repaid during the initial years of the home loan tenure is higher than the principal component. • Contrary to that, the principal amount accounts for a higher fraction during the later period. • The interest repaid gradually decreases every passing month whereas the principal amount goes up. • Thus, a larger home loan like an amount of 30 lakhs for a longer tenure, say 20 years, will end up in a larger interest amount to be paid by the borrower.

  6. Is EMI fixed or does it change during the tenure • Your home loan EMI may change subject to certain conditions. Like, if you have opted for a floating interest rate. • In floating interest rate, the rate of interest on your home loan fluctuates according to the market conditions. • If the interest rate fluctuates, obviously your home loan EMI will follow the same pattern. Or, if you choose to prepay your loan during the tenure. • Prepaying your home loan decreases the principal amount, hence the amount paid as interest will also decrease as the interest will be calculated on the new principal amount of the home loan. Alternatively, if you opt for a progressive EMI. • This option is offered by many banks these days. If your monthly income increases during the home loan tenure, you may choose to increase your EMI.

  7. The Cons • Ultimately, a home loan is a burden. • Unless you are reaping certain benefits out of it, may be tax exemption, it is always better to repay the loan as soon as possible. • It is also advisable not to reduce your EMIs even if the rate of interest on the home loan falls during the tenure because it would do you no good in the long run.

  8. Is EMI fixed or does it change during the tenure • Your home loan EMI may change subject to certain conditions. Like, if you have opted for a floating interest rate. • In floating interest rate, the rate of interest on your home loan fluctuates according to the market conditions. • If the interest rate fluctuates, obviously your home loan EMI will follow the same pattern. Or, if you choose to prepay your loan during the tenure. • Prepaying your home loan decreases the principal amount, hence the amount paid as interest will also decrease as the interest will be calculated on the new principal amount of the home loan. Alternatively, if you opt for a progressive EMI. • This option is offered by many banks these days. If your monthly income increases during the home loan tenure, you may choose to increase your EMI.

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