You repay a home loan in monthly instalments, also known as EMIs, and understanding the maths behind how this EMI is calculated is crucial. Once you have that knowledge, it’ll help you plan your repayments better, compare different loans, and make informed decisions that align with your needs.
What is a Home Loan EMI?
It is the fixed amount of money that you pay towards repaying your home loan. There are two main components of an EMI: one being principal and the other being interest.
- Principal is the actual borrowed amount.
- Interest is the cost of borrowing.
By understanding its breakdown, you can know where your money is going and how your loan is structured.
The EMI Formula Explained
If you’re wondering how to calculate home loan EMI manually, you can use this standard formula for EMI:
EMI = [P x R x (1+R)^N] / [(1+R)^N – 1].
Where,
P = Is the loan amount (Principal)
R = is the monthly rate of interest (annual rate/12/100)
N = Number of Months
Make sure you enter the monthly interest rate. So, if your annual rate of interest is 10%, then your monthly rate of interest is 10/(12*100)= 0.008
Step-by-Step Example of Manual EMI Calculation
For example, suppose you have borrowed ₹20 lakhs at an annual interest rate of 8% for 20 years, which can be taken as 240 months.
Step 1: Convert the annual interest to monthly.
8/(12*100)=0.0067
Step 2: Enter values to the formula and solve it
EMI= [2000000 * 0.0067 * (1+0.0067)^240]/[(1+0.0067)^240-1]
Step 3: Calculate the EMI
EMI = 16,800 (approx.)
Total Interest Payable and Repayment Schedule
Using that same example, over 20 years, you’ll be paying 16800*240=40,32,000
Now, the loan amount was 20,00,000 and the interest you’ll be paying is 20,32,000.
In the early months of repayment, most of it will go towards repaying the interest, and towards the end, it will go towards repaying the loan amount. Here is how your repayment schedule may look:
| Month | EMI | Interest | Principal | Balance |
| 1 | 16,800 | 13,333 | 3,467 | 19,96,533 |
| 60 | 16,800 | 10,500 | 6,300 | 17,40,000 |
| 120 | 16,800 | 7,400 | 9,400 | 13,20,000 |
Pros & Cons of Manual Calculation
Pros:
- It helps you understand how to calculate home loan EMI.
- More control and better understanding of your repayment.
Cons:
- It’s very time-consuming with higher chances of errors.
- Comparing different loan scenarios can be challenging and time-consuming.
- Can’t easily see how prepayments and other changes affect your repayment.
Why an Online EMI Calculator is Better
Even though knowing how to calculate home loan EMI manually is important, using online tools can be better. This is because you can check multiple loan scenarios easily and quickly, whether it’s changes in loan tenure, prepayment structures, or interest rate changes. They also provide amortisation schedules easily, which will help you understand the principal and interest breakdown more easily. Financial institutions like PNB Housing offer a free online home loan EMI calculator that allows you to choose the best terms with ease.
Examples of EMI for Different Loan Terms
Here are a few examples of how EMI changes with a change in the loan terms:
| Loan Amount | Interest Rate | Tenure | EMI Amount |
| ₹10 lakhs | 8.5% | 5 years | 20,517 p.m. (Approx.) |
| ₹30 lakhs | 9.0% | 15 years | 30,428 p.m. (Approx.) |
| ₹25 lakhs | 9.0% | 10 years | 31,669 p.m. (Approx.) |
| ₹25 lakhs | 8.5% | 10 years | 31,000 p.m. (Approx.) |
Disclaimer: The above figures are subject to change based on the loan terms.
Manually calculating your EMI is a great way to understand your loan and repayment structure. But for better planning and precision, it’s best to use an online calculator.
