If you are looking to buy a house or perhaps renovate an existing one, a home loan could be the perfect way to make sure you do not end up using all your hard-earned money on it. The right kind of loan will offer you an amount big enough to cater to your needs while you pay it back in smaller EMIs over the chosen tenor. However, before you settle for a loan EMI, you must determine how much you will be comfortable paying using a home loan EMI calculator. Read on to know how to calculate home loan EMI.

What is a Home Loan EMI Calculator?

A home loan EMI calculator is an online tool provided by all lending institutions that can be used to get an estimate of the Equated Monthly Installments (EMIs) to be paid throughout the loan tenor. It is available free of cost and can be accessed as many times as needed using multiple combinations. 

How Does a Home Loan EMI Calculator Work?

A calculator for home loan EMI works by combining key variables, such as the principal amount, the rate of interest, and the repayment tenor. Once the values are computed, the automated calculator evaluates the EMI amount based on a mathematical formula. This saves the borrower time and the effort of going through long, tedious calculations. Besides, since the tool works on a formula, there is no room for errors and the results are completely accurate. 

Factors Determining Home Loan EMI

Home loan EMI is determined by taking three primary factors into account. These are as follows – 

• Principal or Loan Amount – It is the amount that is borrowed. Your home loan EMI is directly proportional to this amount. The higher the principal, the higher will be your monthly installments. 
• Rate of Interest – It is the rate that the lender charges on the principal amount. Therefore, before settling on the loan amount, it is important to compare various home loan interest rates offered in the market. 
• Repayment Tenor – It is the predetermined period within which the loan amount has to be paid in full. For home loans, the repayment tenor can extend up to 30 years.

Borrowers must be prudent when choosing the above factors in order to avoid paying hefty monthly EMIs. It is a good idea to check one’s eligibility – income, occupation etc. using a home loan eligibility calculator before to ensure one does not end up defaulting on payments.

How to Calculate Home Loan EMI?

Using a housing loan EMI calculator is quite simple. Here are the steps one needs to follow to get an estimate of the monthly dues –

1. Choose a reliable lender and access the online tool on the website
2. Enter the values for your principal amount, home loan interest rate, and preferred loan tenor
3. Click on the ‘Check EMI’ option to get the estimated value

The mathematical formula used in the calculation is as follows –

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

P = Principal loan amount

R = Rate of interest

N = Number of years/Loan tenor

The EMI calculator also shows you the total payable interest on the principal value along with the monthly installments. 

Things to Remember When Using a Home Loan EMI Calculator 

Here are some of the key points that borrowers should keep in mind when using a calculator to estimate the home loan EMI –

• The home loan EMI calculator is a self-sufficient tool that allows one to calculate the monthly installments towards a home loan independently.
• The tool also works as a home loan eligibility calculator as it shows the amount you are eligible for.
• The calculator works on a simple formula: EMI = [P x R x (1+R)^N]/[(1+R)^N-1].
• To get an accurate estimate of the EMI amount, one needs to key in the loan amount, interest rate and repayment tenor in the relevant fields. The online calculator does not ask for professional or personal details related to the bank account, so it is completely safe.
• Almost all banks and Non-Banking Financial Companies (NBFCs) have an online presence and provide an EMI calculator for borrowers to avail of before applying for a housing loan.
• A more comprehensive EMI calculator will take additional details, like, a running loan EMI, insurance and local taxes into account.
• The information entered can be traced in the home loan agreement.
• The EMI calculator will also explain the details of your repayment pattern by segregating the EMI between the payable interest component and the principal component.
• The tool calculates the home loan EMI based on a fixed rate of interest. One must note that the EMI will vary in the case of a floating home loan interest rate.  
• Using the calculator will give you a fair idea of the kind of home loan amount and EMI package that suits your financial health best. 

Benefits of Using a Home Loan EMI Calculator

Listed below are the top benefits of using an online calculator for house loan EMI –

• Easy to Access – The EMI calculator is accessible from anywhere on your Smartphone or laptop or desktop provided you have a good internet connection.
• Accurate Results – The chances of error or miscalculations are higher when the EMI is calculated manually. However, the tool ensures that the results provided are free of errors since they are automated based on a formula.
• Easy to Use – The calculator is easy to use and comprehend, and does not involve too many complex steps to calculate the home loan EMI.
• Perfect for Budgeting – The home loan EMI calculator helps in planning the monthly installments and lets you set the parameters as many times as you needed till you arrive at a figure you are comfortable with and willing to pay.

Summary

A home loan EMI calculator makes the whole process of EMI calculation easier and more convenient. It is useful in budgeting and also helps save up on home loan interest rates. To get your hands on the best home loan, compare various lenders’ profiles and look for minimal documentation, flexible repayment options, and attractive add-ons.