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The loan amount required to buy or construct your dream home is offered at attractive interest rates provided you fulfil the eligibility criteria laid down by the respective lender. Here, we have compiled a table wherein the lowest interest rate and the EMI payable by you for every lakh is mentioned.
Note: The EMI/lakh is calculated after taking into account the following variables - Loan amount - ₹ 1 lakh, repayment tenure - 30 years, Interest rate as mentioned in the table and the processing fee as 0.50 percent
How to Calculate Home Loan EMI Moratorium?
You can calculate the Home Loan EMI moratorium which is being offered by most lenders operating in the country as using the moratorium calculator. All you need to do is enter the balance in the loan account, interest rate, remaining period and the required moratorium period and click on ‘Calculate’. On doing so, the balance after moratorium period, monthly payment and total interest are displayed.
In view of the economic downturn due to the coronavirus pandemic, the Reserve Bank of India has announced that an extension of the moratorium on home loans for an additional 3 months. The moratorium is now from 1 March 2020 till 31 August 2020. Choosing the moratorium will give you the option to not pay EMIs on your home loans without it affecting your credit score. However, the interest on the loan will continue to accrue and will be paid back by extending the repayment tenure accordingly.
What is Home Loan EMI Calculation Formula?
Formula for Home Loan EMI Calculation:EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
E: Equated Monthly Installment, P: Principal or loan amount, r: Interest rate per month (the annual interest rate is divided by 12 to get the monthly interest rate), and n: Number of monthly instalments or loan tenure in months. *This formula doesn’t include the home loan processing fee charged by the bank.
Calculate Your Home Loan EMI with Example
Mr. Patra borrowed a home loan amount of ₹ 3,500,000 (Principal amount or P) from a reputed bank. The rate of interest (R) associated with the loan stands at 8.65% p.a. The tenure of the loan (N) is 360 months for 30 yea₹
After you apply the formula to calculate your home loan EMI, the monthly instalment amount comes up to ₹ 27,285.
P = 3,500,000 R = 8.65% N = 30 years or 360 Months
Interest Rate Applied = 8.65%
Monthly EMI = Rs 27,285
EMI Paid For the Year = Rs 27,285 * 12= Rs 327,419
How to Calculate Home Loan EMI Using Excel Sheet?
Calculation of home loan EMI is a simple method using an excel spreadsheet. In order to do so, three variable of a housing loan is utilised, namely, rate of interest, period, and loan amount. It must be noted that the rate of interest should be calculated on a monthly basis.
For example, if the rate of interest is 12%, it should be calculated as 12%/12 = 1%. The period represents the total number of EMI payable.
In order to calculate EMI, click on the “=” symbol, type ‘PMT(the rate of interest, period, loan amount)’, and click enter. The excel sheet will the produce an amount in a negative value. This indicates the cash flow that the borrower will have to incur. This is the EMI that a home loan borrower would have to pay.
For example if your loan amount is ₹ 5 lakh for 2 years at 12% p.a., the formula to calculate EMI is as follows.
=PMT(12%/12, 24, 500000)
What are the Benefits of Using Home Loan EMI Calculator?
There are many advantages of using the EMI calculation tool provided by BankBazaar. They are listed below:
Easy process: You only have to enter the loan amount, interest rate, processing fee (if available), and tenure. No complicated calculations or difficult mathematics. The actual computation will be taken care of by the calculator.
Get the breakup of the finance charges: This tool helps you understand the financial charges such as total interest payable, and processing fee value associated with your EMI. Since banks and financial institutes present them as a percentage of the loan amount, knowing the actual value can help understand the true cost of the loan.
Comparing loan offers: You can use the loan calculator to compare loan offers from various banks. The results will show you the total cost of each loan along with their respective EMIs. This will help you narrow down on the most feasible option.
Choosing the right tenure: Knowing your EMI also helps you choose the right tenure of the loan. If you can afford to pay a higher EMI, you can choose a shorter loan period and pay off your loan at the earliest. Otherwise, you can pay a more comfortable EMI and extend your loan period.
Helps in validating information: If you are negotiating a housing loan deal with a bank, you can verify the repayment schedule it provides. The repayment table details from the calculator can help you verify this. Do keep in mind that the numbers may sometimes differ. This is because lenders may also include certain other fees and charges in your EMI calculation.
Helps with loan management: Sometimes, while paying your EMIs, you may have some extra funds to make prepayments. If you want to revisit the financials and see how prepayments can help to pay off the loan before the term ends, the home loan EMI calculator can help you do that.
What Factors Affects Your Home Loan EMI?
When calculating your EMI, the calculator includes all the parameters that impact it. Let’s take a look at the various factors that impact your monthly repayments:
Principal: The principal is the loan amount you initially borrow from the lender. It is directly proportional to your EMI. Higher the loan amount, higher the EMI.
Interest Rate: The interest rate is what you pay for borrowing the loan. In short, it shows you the cost of your loan. It differs from one bank to another. The higher the interest rate, the higher the EMI will be. Finding a lender that offers you the lowest interest rates can help you lower your EMIs. The lower the interest rate, the lower the total cost of your loan will be.
Tenure: The time you take to repay the amount you borrow is called tenure or the period of the loan. The tenure is inversely proportional to your EMI. The longer the loan tenure, the lower your EMI. The loan tenure is determined based on your age at the time of borrowing and your retirement age. The longest loan tenure offered banks in India is 30 yea₹
Processing Fee: This value is a percentage of your loan amount or a minimum or maximum fee decided by the lender. It is the fee that the bank charges to process your loan application. You can know about this amount from your loan documents. At least a part of this fee will be payable at the time of application. And your lender may not refund this amount even if your application is rejected.
Prepayments: As mentioned earlier, making prepayments on your property loan can help you reduce the outstanding principal. This, in turn, reduces your interest charges. And both together contribute to reducing your EMIs if you prefer to keep the tenure constant.
What is Flexible and Fixed Home Loan EMIs?
Your housing loan EMI is usually a fixed amount. But there are certain circumstances under which it can change. Let’s take a look at some of these instances:
Flexible EMIs: If you have opted for flexible EMIs such as in the case of step-up or step-down property loans, then there will be a change in your loan EMIs. In the case of step-up loans, your EMI will gradually increase over the tenure. In the case of step-down loans, your EMIs will decrease as time passes.
Partly Disbursed Loan: In the case of partly disbursed loans, the pre-EMIs will increase with each disbursement.
Loan Prepayment: Prepayments impact your EMIs as well. You can either choose to reduce the EMI for the same loan tenure or reduce the loan tenure and keep the EMIs constant. The latter is more beneficial since you will pay lesser interest.
Rise in the floating interest rate: Whenever the repo rate changes, the floating rate of interest also changes. If the floating rate increases, the lender will normally increase the loan tenure while keeping your EMI the same. If the new tenure exceeds the maximum period permitted, then the bank may increase your EMI.
What is a Home Loan Pre-EMI?
In some cases, the lender will disburse the loan amount in stages. When this happens, you have to start paying your EMI only when you get the final amount and the whole loan has been disbursed. Till this date, you have to pay only the interest applicable on the partly disbursed amounts. This is known as pre-EMI. Once the loan gets fully disbursed, the pre-EMIs will stop and you have to start paying your regular EMIs.
However, a wiser option would be to opt for a full EMI payment as it ensures that you have already paid down a portion of the remaining loan amount at the time of possession.
What are the Tax Benefits of Paying Home Loan EMIs?
Taking a loan to buy a house can be expensive, but it also has certain benefits, especially when it comes to taxes. The government offers tax reliefs via the Income Tax Act, 1961 on the EMIs you pay every year. These are as follows:
Section 80C: You can claim a tax deduction of up to ₹ 1.5 lakh every year on the principal amounts paid towards your property loan.
Section 24: Under this section, you can claim a deduction of up to ₹ 2 lakh on the interest component you pay each year.
Section 80EE: Under this section, you can claim an additional interest amount of up to ₹ 50,000 per year. This is over and above the amounts mentioned in Sections 80C and 24. This deduction is subject to certain terms and conditions.
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