House Loan EMI Calculator

Introduction

Having your own home is one of the biggest dreams that a person has. It is a milestone in their life but not an easy one to achieve. The real estate market was stagnant for many years but is one of the main pillars of the economy. The government has also aimed at providing affordable housing to the citizens of the country but even with government aid, for many people taking a loan for purchasing a house is inevitable. This loan is then repaid in easy monthly installments throughout the tenure of the loan. 

Given below is the meaning of home loan EMI and a home loan EMI calculator.

What is a house loan EMI?

A home loan is a loan that is taken for the purchase of house property or construction of a house on a property. This loan is a long-term loan in nature usually up to 20 to 30 years tenure. The rate of interest is also among the lowest in loan categories. Like any other loan, a home loan should also be repaid by the borrower in equal monthly installments known as EMI. The frequency of playing EMI is determined as per the agreement between the borrower and the lender at the time of getting the loan. It is then paid at such pre-determined frequency at the fixed date and interval through many options like post-dated cheques (PDCs), auto-debit from the bank account of the borrower, and net banking transfer. 

What is the formula to calculate house loan EMI?

When we take a home loan, the bank executives inform the borrowers of the EMI that they have to pay every month to repay the loan. The amount of EMI is calculated using a standard formula. This formula involves the borrowers providing three basic inputs i.e., the amount of loan, the tenure of loan, and the rate of interest. The formula for calculating the EMI is given below. 

EMI = P x r x {(1+r)^n/ [(1+r)^n-1]}

In the above formula, 

P = Principal

r = Rate of interest (where ‘r’ is represented as r/12/100 which is a per month rate)

n = Tenure (in months)

In order to understand the calculation of home loan EMI, let us consider an example. Mr. A has taken a home loan of Rs. 50,00,000 from a leading bank at the rate of 7% per annum for a tenure of 20 years. The amount of EMI that has to be paid by Mr. A for this loan will be calculated using the above formula. 

EMI = 5000000 * 0.005833 * {(1+0.005833)^240 /  [(1+0.005833)^240 – 1]}

EMI = Rs. 38,765

The above amount derived using the house loan EMI calculator has to be paid by the borrower for the entire tenure of the loan. This amount includes the interest to be paid on the loan every month as well as the principal amount. The interest amount is calculated on the reducing balance method which means that the interest is calculated on the outstanding principal amount at the beginning of the year. 

What is the Fisdom house loan EMI calculator and how to use it?

House loan EMI calculator is available on all the lender websites. Fisdom also hosts a house loan EMI calculator on its website to provide the users with ease of calculating their house loan EMI within minutes. This tool is available on the homepage under the tab ‘Resources’ and requires the users to provide basic details of the loan to calculate the EMI. 

1. The loan amount
2. Rate of interest
3. Tenure of loan

After providing the above details, the tool will immediately calculate the exact EMI amount for the users and display it on their screens.  

Why is the house loan EMI calculator important?

House loan EMI is one of the biggest expenses that is incurred by the borrowers and therefore requires careful planning. This calculation is a very complex task that may not be easy for every person to understand, especially those who may not have any idea about the financial terms and their implications. As the EMI calculation is tedious and difficult, manual calculations may lead to errors. In such cases, house loan EMI calculators can reduce the efforts and can be time-saving at the same time provide 100% accurate results. Moreover, this tool is available free of cost and can be used multiple times to ensure that the users can get the exact amount of EMI to be paid at the prevailing rate of interest or in any other combination. 

Conclusion

House loan EMI calculators are the first point of reference for borrowers looking for a home loan. It is also a very good tool to compare the home loans provided by various lenders so they can select the lender that can provide the maximum amount of loan at minimum EMI.

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