Home loan EMIs are calculated based on three factors - principal amount, interest rate and repayment tenor. Individuals can avail assistance from home loan EMI calculators to compute their monthly payment liability.
Financial institutions use the amortisation process to calculate home loan EMI. This process divides the entire principal and interest amount over the tenor of the credit. Amortization process considers these three factors –
- EMI amount.
- Principal + interest amount.
- Outstanding amount after deduction of EMIs.
An advantage of this process is that it allows borrowers a clear insight into their repayment schedule. It provides a detailed break-up of the amount they are paying towards principal and interest, and the outstanding balance amount after each EMI. You can also know about Personal Loan App
While paying home loan EMIs, the interest portion is significantly higher than the principal one during the initial days. However, this ratio alters over time, but the EMI amount remains constant.
Amortization process for housing loan EMIs is not easy to understand, and borrowers may find it confusing. In that case, aspiring homeowners can take help of a traditional mathematical formula to compute their home loan EMI.
- EMI = [P x r x (1+r) n] / [(1+r) n-1]
Here P refers to the principal, r refers to the rate of interest, and n refers to the number of monthly installments.
Home loan EMI calculators are available online, borrowers can use the same free of cost. It is a convenient way for customers to calculate their home loan EMIs in advance without getting into the complications of the amortisation process.
