It is extremely important to plan well while buying a property or taking a loan. Taking loans without proper planning can land you in a lot of financial trouble. Therefore, it is important to understand how to calculate EMI on your home loans so that you can make the right decisions and can plan your finances before-hand. This will not only help you pay the debt without worrying about your expenses but will also help you assess your repayment capability before you opt for a loan, thus saving you from the financial crisis. Calculating your Home loans in advance will give you a better understanding of the money you would have to spend every month and this will help you plan and decide whether you are able to save that much money or not.
Understanding Home Loan EMI
EMI stands for Equated Monthly Instalment. The sum of money you borrow for purchasing a house is the home loan amount. The amount that can be borrowed depends upon the cost of the property and the repayment capacity of the borrower.
Understanding the Interest Rate
The interest rate is the rate at which the interest is levied on the amount that is borrowed. Since the interest rates on home loans may vary from one financial institution to another it is always wise to check and compare the rate of interests before applying for a home loan.
How To Calculate home loan EMI
To calculate EMI, You need to know your loan amount, the tenure (in months) for which you want to borrow the amount and the interest rate that is levied on the loan amount by the lender. Here is the formula:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1],
Where,
P is the amount borrowed as a loan
R is the rate of interest levied on the loan amount
N is the tenure of repayment of the loan (in months)
Many websites have a Home Loan EMI calculator which makes it super easy to calculate EMIs on your loans which will save your precious time and will also give you accurate results to plan your finances well in advance.
