About the Home Loan EMI
A home loan is usually the largest and longest loan a household takes, so small differences in rate, tenure or prepayment add up to lakhs of rupees. This home loan EMI calculator shows the monthly instalment, the total interest and a year-wise schedule, and lets you add a one-time or yearly prepayment to see the interest saved and how much sooner the loan ends.
Home buyers use it to decide how much to borrow and for how long, and to compare offers from banks and housing finance companies. Existing borrowers use the prepayment option to evaluate whether to put a bonus, a maturing deposit or business profits into the loan. Seeing the effect in rupees and months makes that decision much easier than looking at the interest rate alone.
The result depends on the loan amount, the rate and the tenure, plus the size and timing of any prepayment. Prepayments made early in the loan save the most, because the outstanding balance, and therefore the interest charged on it, is highest at that stage. Most home loans carry a floating rate linked to an external benchmark, so the actual EMI or tenure will change when rates move.
How to use it
- 1Enter the loan amount, the annual interest rate and the tenure in years.
- 2Read the monthly EMI, the total interest and the total payment.
- 3To test a prepayment, choose one-time or every year, then enter the amount and when the first one is made.
- 4Compare the interest saved and the reduced tenure, and open the year-wise schedule for the new balances.
How this is calculated
EMI = P × r × (1 + r)^n ÷ [(1 + r)^n − 1] P = loan amount, r = annual rate ÷ 12 ÷ 100, n = number of months. With a prepayment, the extra amount is deducted from the outstanding principal in the month it is paid, the EMI stays the same, and the schedule is recalculated month by month until the balance reaches zero. Interest saved = interest without prepayment − interest with prepayment.
Frequently asked questions
How does prepayment reduce home loan interest?
A prepayment goes entirely towards principal. Interest from the next month is charged on a smaller balance, so more of each later EMI also goes to principal. The calculator keeps the EMI unchanged and shortens the tenure, which is the option that saves the most interest.
Should I reduce the EMI or the tenure after a prepayment?
Reducing the tenure saves more interest, because the loan is cleared sooner at the same monthly outgo. Reducing the EMI improves monthly cash flow but keeps the loan running for the full period. If your budget is comfortable, keeping the EMI and shortening the tenure is generally the better choice.
Are there charges for prepaying a home loan?
Lenders are generally not permitted to levy prepayment or foreclosure charges on floating-rate home loans given to individual borrowers. Fixed-rate loans, and loans where a company or firm is the borrower, may carry a charge. Check your loan agreement and the lender's schedule of charges before making a large prepayment.
How much home loan can I afford?
A common guideline is to keep all EMIs together within about 40% to 50% of your net monthly income, leaving room for living costs, savings and rate increases. Lenders apply their own income and property-value limits. Use the loan eligibility calculator for an estimate based on your income and existing EMIs.
Do home loans have tax benefits?
Deductions have been available under the old tax regime for interest on a home loan and for principal repayment, each subject to conditions and ceilings. The rules differ for self-occupied and let-out property and are amended from time to time. Confirm the current provisions, and which regime suits you, with a tax adviser.