A Simple Guide to Calculate Home Loan EMI with an Example

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5 Mins 14 Jun 2022

Highlights

What is a Home Loan EMI?
How to Use the Bajaj Housing Finance Home Loan EMI Calculator?

What is a Home Loan EMI?

A Home Loan EMI is the amount you pay every month towards the repayment of your Home Loan. EMIs are pre-decided based on several loan parameters.

The formula to calculate the EMI for a Home Loan is based on the principal amount, the interest rate, and finally, the loan duration.

Aspiring homeowners can use our Home Loan EMI Calculator to calculate their tentative EMIs based on their Home Loan requirements. This will help them get an idea of how feasible their required Home Loan amount would be in terms of repayment.

Also Read: 5 Strategies to Manage High Home Loan EMIs Effectively

Formula to Calculate Home Loan EMI

The Bajaj Housing Finance Home Loan EMI Calculator uses an easy formula to determine the Equated Monthly Instalment. Here’s the formula to calculate the Home Loan EMI:

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

Let us understand how to use this formula to calculate the EMI with an example. If someone takes out a Home Loan of Rs.15 Lakh at an annual interest rate of 7.45%* p.a. for a tenure of 15 years (180 months), the EMI can be calculated using the formula:

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

Where:

P is the principal loan amount, which is Rs.15,00,000.

N is the loan tenure in months, which is 180 months.

R is the interest rate per month, which is 8.5/12/100 = 0.00708

Therefore, EMI = [15,00,000 x 0.00708 x (1 + 0.00708)^180]/[(1 + 0.00708)^180 – 1] = Rs.14,841.

How to Use the Bajaj Housing Finance Home Loan EMI Calculator

Visit the official Bajaj Housing Finance website, look for 'Calculator' on the panel, and select ‘Home Loan EMI Calculator.’ To calculate your Home Loan EMIs, enter the following details:

Loan amount: It is the total loan amount you want
Loan duration: This refers to the time given to you to complete your Home Loan repayment
Rate of interest: It is the cost of borrowing the principal loan amount

Also Read: Know Why Paying Home Loan EMI Is Better than Renting a Home

Once you input the above details, the Home Loan EMI Calculator estimates the loan amount and displays the result immediately. You can also use the EMI calculator to gauge the status of your current Home Loan.

*Terms and conditions apply

Factors that Affect Your EMI Amount

Some of the factors that affect your monthly instalments are:

Loan Amount: The principal loan amount significantly impacts the EMI. Higher loan amounts may result in higher EMIs. However, the EMIs are subject to change based on other factors.
Interest Rate: The interest rate charged by the lender is another significant factor. Higher interest rates lead to higher EMIs and vice versa. Even a small change in the interest rate can significantly affect the EMI amount over the loan tenure.
Loan Tenure: The duration for which the loan is taken, known as the tenure, plays a significant role. Longer tenures typically result in lower EMIs but higher overall interest payments, while shorter tenures lead to higher EMIs but lower total interest payments.

Benefits of Calculating Home Loan EMIs

Calculating EMIs preemptively can help borrowers assess their financial commitments in the following ways:

Firstly, it helps in determining the optimal loan amount and repayment plan aligned with one's financial capacity, mitigating the risk of defaulting on repayments and incurring late fees.
Secondly, by estimating EMIs beforehand, individuals can effectively budget their monthly finances, ensuring they allocate sufficient funds to cover loan repayments without compromising essential expenses.
Thirdly, comparing loan offers enables borrowers to select the most advantageous terms, fostering informed decision-making and financial stability.

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