Understanding the Benefits of a Home Loan EMI Calculator

Buying real estate is a huge investment that requires wide reserves of cash. And not everyone may possess the volume of funds for taking on such high-end purchases. This is when housing credit can help you obtain large sums of money with easy repayment options to suit every pocket. These repayments can be much simpler to manage with the aid of helpful tools such as a Home Loan EMI calculator, whereby one knows the payable EMIs before they even take up a house loan.  

What Is Home Loan EMI 

Borrowing any kind of credit from a lending institution necessitates timely repayments within a set time frame. Similarly, Home Loans are also repaid in the form of fixed amounts every single month until the end of the loan tenor. This is known as Equated Monthly Instalments or EMIs, which one pays to the lender each month to service their ongoing loan. 

The EMI for a Home Loan relies on three essential factors: 

• Your Home Loan principal – This is the sum of money that you borrow from the lender
• Home Loan interest rate – Lenders levy a certain interest rate on the principal amount. This rate will vary across lenders depending on many crucial determinants 
• Loan repayment tenor – It is the specific duration within which you need to repay the borrowed principal along with the charged interest  

What Is a Home Loan EMI Calculator

The Home Loan EMI calculator is an easy-to-use online tool that allows you to calculate the EMI outgo on your loan repayments for each month. It also enables you to alter and adjust the numbers to try different permutations and combinations until you arrive at comfortable EMI figures. 

How to Use a Home Loan EMI Calculator

You can calculate your EMI either manually or by using the EMI calculator. Both methods employ the following mathematical formula: 

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

Here,  

• P is the principal – It is the loan amount sanctioned to you  
• R is the rate of interest – This is charged on the loan amount as set by the lender  
• N is the number of years the loan is secured for – EMIs are paid every month, so the duration of repayment is considered accordingly on the basis of number of months 

Manual Calculation of EMI

If you take a housing loan of Rs. 50 lakh at an interest rate of 12% for 11 years, the approximate EMI will be calculated as follows: 

• P = Rs. 50 lakh 
• R = 12/100/12 = 0.12/12 = 0.01 
• N = 11 years or 132 months 

Therefore, EMI = [50,00,000 x 0.01 x (1 + 0.01)^132]/[(1 + 0.01)^132 – 1] 

= 68389.7965 

EMI outgo = Rs. 68,389 per month

EMI Calculation Using an Online Home Loan EMI Calculator

Manual calculations can be time-consuming with ample scope for errors. A Home Loan EMI calculator minimises these issues letting you compute big numbers within seconds. You will also need to consider and compare the loan processing fee and foreclosure charges levied by your lender. Once you input the requisite information into the calculator, you can view the loan specifics in no time. 

EMI calculators normally contain just three basic fields:  

• The desired loan amount 
• Interest rate offered by the lender 
• Loan tenor in months/years 

You may enter these values in their respective fields or you can just use the slider to select the required numbers. 

One can access a Home Loan calculator effortlessly with this step-wise guide given below: 

• Navigate to the Home Loan EMI calculator of your preference
• Enter the loan amount that you wish to obtain as a loan
• Select the interest rate offered by your lender
• Choose the tenor bearing in mind your budgetary constraints
• Upon providing all the details, the calculator will display the monthly EMI and the overall payable interest
• You can further change the three values to customise your loan as per need or compare different deals while trying to pick the right lender

Benefit of a Home Loan Calculator

A Home Loan calculator is a handy financial tool and extends the benefits mentioned herein: 

Easier and Faster Calculations

Home Loan calculations may be complex and lengthy, but it is extremely important to get them right. You can decide the appropriate loan amount and the correct tenor based on this number crunching. So, if you plan on taking a Home Loan, computing these estimates can make it easier to secure the best Home Loan. Thus, you can plan your loan better and handle the repayments efficiently. 

Error-free Calculations that Save Time

Manual number crunching can be laborious and liable to mistakes. However, unlike manual calculations, a housing loan calculator helps you to carry out complicated calculations in minutes displaying accurate answers every single time. One can use the tool at their convenience saving valuable time and energy.  

Compares Home Loan Offers

Users can access the calculator as many times as they wish free of charge, allowing them to compare the different Home Loan offerings of other lenders in the market.  

What Is Home Loan Amortization Schedule

A Home Loan amortization schedule is the division or breakup of monthly EMIs in a tabulated format for easier understanding. Along with specifying the EMI amount and month, the table also displays the breakdown of instalments into principal and interest components. This way, the amortization schedule provides a ready reckoner of your repayment schedule.  

While the EMI amount remains constant every month, the proportion of principal and interest changes during the tenor. Upon studying the amortization table, you will notice that the interest portion of the EMIs is much higher than the principal portion in the initial years of your repayment. Later, as the loan progresses, the interest variable reduces while the principal sum forms a major chunk of your EMI outgo.

Home Loan Tax Benefits 

House loan EMI pay-outs tend to be a significant sum, which is why, the Indian government offers several tax relaxations for borrowers under different sections of the Income Tax Act of 1961. One can claim the stipulated benefits of these provisions as applicable from their yearly taxable income when filing tax returns. There are, in all, seven types of tax reprieve for housing loan borrowers such as: 

Tax Deduction on Home Loan Interest Payments

Under Section 24(b), you can claim a tax deduction of up to Rs. 2 lakh on the interest component of your house loan. To maximise your savings, yearly interest payments must be equal to or more than Rs. 2 lakh. 

Tax Deduction on Under-Construction Properties

One cannot secure these concessions while the property is still under construction. You can avail them only after the completion of the building or house. The maximum deduction allowance is limited to Rs. 2 lakh and may be claimed through five equal instalments. 

Principal Repayment Deduction

Section 80C of the Income Tax Act permits tax relief on the principal repayment of your house loan up to Rs. 1.5 lakh per year. 

Deduction for Registration and Stamp Duty Charges

House loan borrowers are also eligible for tax exemptions on registration and stamp duty costs of their property covered within the limit of Rs. 1.5 lakh under Section 80C. However, this is a one-time deduction and applies only to the year when these charges are incurred. 

Tax Deduction for Joint Housing Loan

If you avail of a Home Loan jointly with another family member as your co-applicant, each of you can claim tax relaxations up to Rs. 2 lakh on the interest payments and then up to Rs. 1.5 lakh on the principal amount doubling the tax savings.

Section 80EEA Deductions

Ongoing house loans sanctioned between 1st April 2019 to 31st March 2022 for properties whose stamp value is less than Rs. 45 lakh are entitled to the benefits of this provision. If you satisfy the conditions mentioned in this section, you can easily enjoy additional deductions up to Rs. 1.5 lakh each financial year. 

Section 80EE Deductions

Section 80EE permits you to avail tax exemptions up to Rs. 50,000 a year if the following criteria are met: 

• Individuals should have obtained the loan between 1st April 2016 to 31st March 2017
• The loan amount must be below Rs. 35 lakh
• The value of the property you wish to buy with the borrowed funds should not be more than Rs. 50 lakh
• Borrowers should not hold any other property in their name at the time of loan sanction

Summing Up

All the available deductions can lower your repayment burden in a big way. A housing loan is a high-end financial commitment extending for a good number of years. It can severely dent your cash flow if you don’t plan for it methodically. Hence, remember to utilise a Home Loan EMI calculator before you apply for a loan. This will enable you to accurately gauge credit viability in relation to your current income sources so as to restrict the cost of credit to manageable limits.