# Home Loan EMI Calculator 2023: Formula And How To Calculate

5 min read • Published 13 January 2023 Written by Vinit Kulkarni

The home loan EMI (Equated Monthly Instalments) calculator helps you compute your home loan’s monthly payments. You can enter the principal, interest rate and tenure to get your estimated repayment plan.

Get a better understanding of your monthly EMIs and total loan costs with the EMI calculator.

## What is a Home Loan and Home Loan EMI?

A loan from a bank or an HFC (Housing Finance Company) to purchase a house is known as a home loan. Home loans are among the most popular loan products, making buying your dream home easier.

Taking out a home loan for a large sum is spread over an extended period. An interest rate is charged by the lender on the amount borrowed. Your monthly payments are known as EMIs. EMI comprises the principal and interest and it stays constant throughout your loan tenure.

## What is a Home Loan EMI calculator?

A Home Loan EMI Calculator is a handy simulation tool. It helps you calculate your monthly EMIs based on your amount (principal), interest rate, and loan tenure.

You can enter the details in the box assigned to ‘Loan Amount’, ‘Interest Rate’, and ‘Loan Tenure’. Once the details are entered, the EMI to be paid every month to the bank is displayed.

The Formula to calculate the Home Loan EMI

The Home Loan EMI can be calculated using this formula:

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

E: Is the EMI (Equated Monthly Instalment),

P: Is the Principal or original amount of the loan,

r: Is the interest rate fixed by the bank (monthly rate),

The monthly interest rate = Annual interest rate/12/100, and

n: Tenure of loan (in months).

Note: The processing fees charged by the bank or lender aren’t included in this formula.

Let’s understand the calculation of a Home Loan EMI with an example.

X takes a home loan of Rs. 25,00,000 at an interest rate of 7.5% p.a. for 20 years (240 months):

P = Rs. 25,00,000

R = 7.5% p.a.

So, the monthly interest rate = 7.5/100/12 = 0.006

N = 20 years

EMI= 25,00,000 (1 + 0.006)240 / ((1 + 0.006)240 – 1) = Rs. 20,140.

Monthly EMI = Rs.20,140

## How to Use Excel to Calculate Home Loan EMI?

It is easy to calculate the EMI for a home loan using an excel spreadsheet. You would require three variables of the home loan, i.e., principal, interest rate, and tenure. Also, make sure that you use the monthly interest rate.

To calculate the EMI, you must click the symbol “=”, type the details in this format – PMT (interest rate, loan tenure, loan amount)’, and then click enter. The amount displayed will be a negative value. This amount is the EMI to be paid by the borrower.

## Benefits of using the home loan EMI calculator

The EMI calculator has a lot of benefits. They are mentioned below:

• Simple process: The entire calculation is done by the calculator. All you need to do is enter the principal, interest rate, loan tenure and (if the details are available).
• A better understanding of the Loan: With this calculator, you will be able to understand various financial charges linked with the EMI, like total interest value and helping you know the cost of your loan.
• Comparison of offers: The calculator can compare loans offered by different banks along with their EMIs, helping you choose the feasible option.
• Selection of tenure: Once you know the EMI using the calculator, you can select the correct loan tenure. You can reduce or extend the loan tenure based on your comfort and affordability.
• Verification of information: When you approach a bank for a home loan, they give you a repayment schedule. The calculator will help you verify this schedule. Note that there could be a variation in the numbers due to bank charges.

## Factors Impacting Your Home Loan EMI

The Home Loan EMI calculator will consider every parameter that affects it. Let’s look into the factors impacting your EMI:

• Principal: It refers to the amount borrowed from the bank/lender. The EMI is directly related to the loan amount; the more you borrow, the higher the EMI.
• Interest Rate: When you borrow a loan, the interest rate is how much the loan (the facility of getting the amount) costs you. This rate varies between lenders. If the interest rate is high, your EMI will also be high. Finding a lender who offers lower interest rates will reduce the overall cost of your loan.
• Loan Tenure: When you borrow money,. The longer the tenure, the lower your EMIs will be. Higher tenure leads to higher outflow of interest for the borrower. The loan tenure depends on how old you are when you take a loan and your expected age of retirement. The maximum tenure offered by banks is 30 years.
•  A portion needs to be paid when you submit your application. Note that this amount paid will not be reimbursed upon rejection of the application.
• Prepayments: If you prepay your property loan, it can help reduce the money you owe. This means paying less interest and lower EMIs if the repayment period remains constant.

### Is the Home Loan EMI calculator the same as prepayment Calculator?

No. They are not the same. An EMI calculator helps calculate monthly instalments on your loan, whereas a Prepayment calculator helps calculate your savings on interest if you prepay a portion of your loan.

### How can I arrive at an affordable EMI using the Home Loan EMI calculator?

You can adjust your tenure and loan amount on the calculator to arrive at an EMI you can afford.

### What happens if you skip paying a few EMIs on your home loan?

If you skip a few EMI payments, the bank/lender may impose late fees or penal interest.

### What is the 40% Rule for an EMI?

According to this rule, the EMIs on all loans you take should not be more than 40% of your monthly income. CA with experience in Credit and Risk, has underwritten loan book of 500Cr+. Previously worked at Essel Finance and Western Capital.

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