Home Loan EMI Calculator using Excel Examples
When it comes to any loan, it is very important to understand what will be your EMI (Equated Monthly Installment), how to calculate home loan EMI, how long you will have to pay the EMIs and what is the interest rate at which you pay interest on your principal amount.
In this article, we will see how you can calculate Home Loan EMI, based on the loan interest rate and tenure. (Currencies used are in INR)
Note: You’ll find the Excel Calculator Download link on my website here.
Watch this video about Home Loan EMI Calculation method in Excel:
What is Home Loan EMI
- EMI stands for Equated Monthly Installment
- It includes repayment of the principal amount and payment of the interest on the outstanding amount of your home loan
- A longer loan tenure helps in reducing the EMI, but increases the interest amount you pay on your home loan
- Opt for higher home loan EMI to reduce your interest amount and tenure
- There are 2 parts of your EMI: Principal amount & Interest Amount
- Interest Amount is high initially during your Home Loan tenure
- Principal amount is less initially during your Home Loan tenure
- High interest amount is already taken at the initial home loan period from your EMIs
- You should pre pay most of your principal amount if you want to decrease maximum interest amount in your Home Loan
- You can easily calculate your Home loan EMI using excel calculator I have provided here
- Pre pay your home loan principal amount initially as much as you can to decrease interest amount that you have to pay throughout your loan tenure
- Increase in home loan tenure will increase the interest amount you’ll pay throughout your home loan tenure
Importance of Loan Interest Rate
- It is very important to know the interest rate of loan
- Compare the interest rates from various banks and financial institutions before applying for loan
- Know the difference between fixed and floating interest rates
- Go for floating interest rates to get benefits of interest rates decrease
- You interest amount in every EMI depends on this Interest rate
- High interest rate means, more interest amount you pay on your home loan. Low interest rate means, less interest amount you’ll pay.
How Home Loan Calculator helps you?
- Using an excel home loan calculator can help you know your monthly EMI
- You can provide the home loan tenure and loan interest rate in order to know how much interest you’ll pay
- You can also check the decrease in principal amount if you pre pay some of the principal amount
- Home Loan calculator will help you plan your other goals according to your monthly EMIs and pre payments
How to decrease Home Loan Interest?
- You can easily decrease the home loan interest amount by pre paying your principal amount
- Home Loan interest amount is calculated based on your outstanding principal amount remaining
- So in order to decrease the interest that you’ll pay, you need to decrease your outstanding principal amount
- The sooner you decrease your outstanding principal amount at the initial stages of loan tenure, more interest you’ll be saving
Watch this video on how much loan interest you can save:
Home Loan Calculator Example:
Loan Amount: Rs. 30,00,000
Interest rate: 6.95%
Tenure: 8 Years (96 Months)
As can be seen from above screenshot, you pay total of Rs. 39,19,348.31 during your entire Home Loan tenure.
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Principal Amount = Rs. 30,00,000
Interest Amount = Rs. 9,19,348.31
Also, we can see that the interest amount is high initially, and it decreases with time. The highest ( Rs. 17,375) in the first month
Whereas, principal amount is less initially, and it increases with time. The lowest ( Rs. 23,451.54) in the first month.
Here is another screenshot after the end of Loan Tenure. As can be seen, principal amount is highest and interest amount is the lowest in the last month.
Income Tax Savings using Home Loan
- You can also Save income tax if you are paying home loan EMIs
- The principal amount you pay can be claimed under Section 80C (Maximum Rs. 1,50,000) to save your Income Tax
- The interest amount you pay can be claimed under Section 24 (Maximum Rs. 2,00,000) to save your Income Tax
Other Tax Savings investments include Public Provident Fund, National Savings Certificate, Employee Provident Fund and 5-year Fixed Deposits
Frequently Asked Questions (FAQs)
Q. What does an EMI mean?
Ans. EMI refers to the ‘Equated Monthly Installment’ which is the amount you will pay on a specific date each month till the loan is repaid in full. The EMI comprises of the principal and interest components which are structured in a way that in the initial years of your loan, the interest component is much larger than the principal component, while towards the latter half of the loan, the principal component is much larger.
Q. What is a Home loan and how does it work?
Ans. Home loans are availed either for purchase of an under-construction or a ready property from a developer, purchase of a resale property, to construct a housing unit on a plot of land, to make improvements and extensions to an already existing house and to transfer your existing home loan.
Q. When can I make a home loan application?
Ans. You can apply for a Home Loan whilst you are working abroad, to plan for your return to India in the future. You can apply at any time once you have decided to purchase or construct a property, even if you have not selected the property or the construction has not commenced.
Q. When does my home loan EMIs start?
Ans. EMI’s begins from the month subsequent to the month in which disbursement of the loan is done. For loans for under-construction properties EMI usually begins after the complete home loan is disbursed but customers can choose to begin their emi’s as soon as they avail their fist disbursement and their emi’s will increase proportionately with every subsequent disbursement. For resale cases, since the whole loan amount is disbursed in one go, emi on the whole loan amount start from the subsequent to the month of disbursement
Q. How does your home loan repayment work?
Ans. A home loan is usually repaid through Equated Monthly Instalments (EMI).The EMI comprises of the principal and interest components which are structured in a way that in the initial years of your loan, the interest component is much larger than the principal component, while towards the latter half of the loan, the principal component is much larger.
Originally published at FinCalC Blog.
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