Owning a house is everyone’s dream, and almost everyone will have to take a home loan for this. To know about your home loan EMI, read ahead.
If you are searching for ‘40 Lakh home loan EMI’ or ‘30 Lakh home loan EMI’, you need to first understand what doctors determine your EMI.Your EMI mainly depends on your Rate of Interest (ROI) which in turn varies based on many factors. These include-
Your credit score is a number that reflects your credit history and your creditworthiness. The higher your credit score, the easier it will be for you to get a loan with a lower interest rate.
Your choice of tenure will affect your EMI directly. If you choose a shorter tenure, your EMI will be lesser than that of a long tenure loan.Please bear in mind that even though a longer tenure would mean a lower amount of EMI per month, you will pay a higher amount in interest.
The amount of loan directly affects your ROI as well as your EMI. In most cases, banks charge lower interest rates for bigger loan amounts.
Your EMI amount will also vary depending on the type of interest rate you opt for. If you have chosen a fixed rate of interest, your EMI will remain unchanged throughout the tenure of your loan. In case you have chosen a floating rate of interest, your EMI will be subject to the ups and downs in the economy.
Your mode of employment, and where you are employed plays a big role in deciding your ROI and EMI. In most cases, banks give loans at lower interest rates to people who are salaried, as compared to a self-employed applicants.
The location and valuation of the house plays a very important role while taking a home loan. If your house is at a prime location or has a high value, your loan might attract lower interest rates.
If you are curious to know the formula that is used for the calculation of home loan EMIs, it is as follows -
EMI = [P x R x (1+R)^N ] / [(1+R)^N-1]
Where, P stands for the principal amount that is borrowed,
R stands for the rate of interest imposed per month, and
N stands for the tenure in number of months.
You can also just use this home loan EMI calculator to cut the process short and perform it online.
After calculating the downpayment of your new house, it is a good idea to check your EMIs beforehand. Home loan EMIs can go up to 20 years and knowing in advance can help you to plan your finances.
For example Suresh and Reshma are planning to take a home loan, and are interested in‘40 Lakh home loan EMI for 20 years. Let us assume that the ROI is 9% per annum, so according to the formula -
EMI = [P x R x (1+R)^N ] / [(1+R)^N-1]= [40,00,000 X 0.0075 X (1+0.0075)^240] / [(1+0.0075)^240-1] = Rs.35,989
Suresh and Reshma’s 40 Lakh home loan EMI for 20 years will be Rs.35,989.
But what if they were interested in a 40 Lakh home loan EMI for 10 years? Let’s assume the ROI is 9% p.a., then according to the formula,
EMI = [P x R x (1+R)^N ] / [(1+R)^N-1] = [40,00,000 X 0.0075 X (1+0.0075)^120] / [(1+0.0075)^120-1] = Rs.50,670
Their 40 Lakh home loan EMI for 10 years will be Rs.50,670.
This example is great for understanding that the total interest amount varies greatly based on the tenure.
In case of a 40 Lakh home loan EMI for 20 years, the total amount paid as interest will be Rs.46,37,369. Whereas in case of a 40 Lakh home loan EMI for 10 years, it will be Rs.20,80,437.
Let us take another example to understand how home loan EMIs are calculated. Suppose you are looking for a 30 Lakh home loan EMI for 10 years, and your rate of interest is 9%, then your EMI will be -
EMI = [P x R x (1+R)^N ] / [(1+R)^N-1] = [30,00,000 X 0.0075 X (1+0.0075)^120] / [(1+0.0075)^120-1] = Rs.38,003
If the EMI amount seems too high for you, you can always opt for a longer tenure. A 30 Lakh home loan EMI for 20 years can help you in such a case. Let’s assume that the ROI is 9%, then,
EMI = [P x R x (1+R)^N ] / [(1+R)^N-1] = [30,00,000 X 0.0075 X (1+0.0075)^240] / [(1+0.0075)^240-1] = Rs.26,992
Here too, you can see that in case you opt for a 30 Lakh home loan EMI for 20 years, the total amount you pay as interest will be Rs.34,78,027. Whereas it will just be Rs.15,60,328 if you calculate your 30 Lakh home loan EMI for 10 years.
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Calculating your EMI in advance has a lot of advantages. Since a home loan can go from about 10 to 30 years, planning your finances beforehand can help you manage it properly. That way there will be lesser chances of missed payments.
The tenure of the loan can affect your EMI and the amount you pay as interest. Thus, you should choose an optimum tenure. A tenure that is too long might reduce your EMI but you will end up paying a bigger sum as interest.
And in case you are in need of some urgent funds to take care of your home loan down payment or any other emergency, you can rely on moneyview personal loans.
It is important to calculate your EMI before taking any loan so that you can plan your finances beforehand.
Yes, home loans mostly are taken for longer tenures. You can get a home loan for anywhere from 10 to 30 years, depending on your age and income.
The amount you can avail as a home loan depends on multiple factors such as your credit score, monthly income, down payment, valuation of your house, etc. Factors like your debt-to-income ratio i.e. the amount of debt you are paying off with your existing salary also matters.
Yes, you can get a home loan even if you are an entrepreneur or are self-employed.
Yes, you can take another home loan if one home loan is running on your name. This all matters on your income, credit score, etc.
You can get a home loan if you have retired. It will depend on your assets, credit score, and other such factors. Please note that as your age increases, you would have to opt for shorter tenures.
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