A home loan can help buyers actualize their dream of homeownership. Home loans give buyers immediate access to credit, allowing them to realise their dream home. Home loans are a form of secured financing; these loans are secured by the property Therefore, avaling of a home loan requires planning. 

Before we divulge the nitty gritty of calculating EMIs, let us understand the workings of home loans. 

Home Loan EMIs: Here’s What You Need to Know 

When you avail yourself of a housing loan, your lender will charge interest on the principal amount and you will repay this interest along with the principal in the form of home loan EMIs. Each EMI you pay will have an interest component and a principal component. Lenders recover interest first and therefore, during the first few years of home loan repayment, lenders direct the major portion of one’s home loan EMIs to the repayment of the interest component of the loan. 

So, how to calculate EMI? Read on to know the answer. 

How to Calculate EMI? 

The interest on a home loan is calculated on a compounding basis. One can calculate home loan EMIs using the following formula: 

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

Here, 

P is the principal amount, N is the loan tenor in months and R is the monthly interest rate.

Manually calculating EMIs using this formula may be time-consuming. Instead, one can use a home loan EMI calculator. The home loan EMI calculator is an online tool that loan applicants can use to calculate their loan EMIs. One need not pay any fee to use the home loan calculator. Further, the home loan calculator is quite easy to use and anyone who uses a smartphone, laptop or computer can use this tool to calculate their home loan EMIs and indulge in financial planning. 

If you wish to calculate your EMIs using the home loan calculator, simply follow these steps: 

1. Enter your desired loan amount. 

2. Enter your desired loan tenor. 

3. Enter the rate of interest you are being offered. 

Once you enter these details, the home loan calculator will give you your EMIs. Alongside the EMIs, the calculator will also give you an amortization schedule which you can refer to get an idea of how much loan you have already repaid and what remains to be paid by you. 

Let us now look at why home loan applicants must use a home loan EMI calculator. 

Benefits of a Home Loan Calculator 

1. The home loan EMI calculator is quick and accurate. Thus, home loan applicants can use this tool to compare offers from different lenders and pick up the most beneficial loan offer for them. Home loan applicants can also use the home loan EMI calculator to check the affordability of the various loan offers. 

2. Home loan calculators tell borrowers the EMI they will have to pay to repay the loan amount they wish to avail themselves of. Thus, home loan calculators give borrowers a chance to indulge in financial planning and avoid late fees and other penalties that come along with missed EMI payments. 

3. Home loan calculators also give borrowers their amortization schedule and loan applicants can look at this schedule to plan prepayments. Prepayments deliver maximum benefits when borrowers opt for them at a time when the interest portion of their EMI is considerably higher than the principal component. 

4. The home loan calculator is quick and the loan applicants can use the time saved through the use of the calculator to complete other tasks, such as finding the right lender and negotiating with them for the best loan terms and conditions. 

In all, a home loan EMI calculator is a powerful online tool that all loan applicants should make a part of their home loan journey. All home loan applicants should also use the home loan EMI calculator to arrive at a combination of loan value and loan tenor that gives them loan EMIs they can comfortably afford to repay.