A home loan is a step forward in achieving your dream of buying your own house. With a home loan, you can get a lump sum amount from any lending institution to pay for your home purchase, and you can pay back the loan amount in equated monthly installments, or EMI, over a period of a few years.
And when you apply for a PNB home loan online, you can be assured of getting your loan at attractive interest rates with a flexible EMI tenure. With more than 30 years of expertise, PNB Housing offers housing loans that fit your budget well and come with a low rate of interest.
Read on to understand more about EMIs and how to calculate your home loan EMI.
What Is EMI?
Your home loan EMI is a fixed sum that you pay back to the lender towards your home loan repayment every month.
The EMI is calculated based on your loan amount, its interest rate, and the tenure of the loan. This means that a low-interest home loan scheme with a longer tenure equates to less EMI for you to pay every month.
How To Calculate EMI On Home Loan?
When applying for a home loan, it is essential to calculate the EMI to help you understand how much you need to pay each month and whether it fits into your budget. A home loan EMI calculator is the best way to compute your EMI with a few easy clicks.
The formula to calculate a home loan EMI is as follows:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Here:
P stands for the principal loan amount
N stands for the loan tenure in months
R is the rate of interest
Let us understand how the EMI is calculated with the help of the following example:
If Mr. Raj avails a loan of Rs. 20,00,000 at an annual interest rate of 7.5% for a tenure of 120 months, then his EMI will be:
EMI= ₹20,00,000 * 0.006 * (1 + 0.0062)120 / ((1 + 0.0062)120 – 1) = ₹23,740.
The total EMI will be Rs. 23,740 * 120 = Rs. 28,48,800. Principal loan amount is Rs. 20,00,000 and the Interest amount will be Rs. 8,48,842.
Factors That Affect Home Loan EMI
As we saw above, your home loan EMI is calculated using the loan principal, interest, and tenure. When there’s a change in any of these factors, your EMI amount will also be different. Following are the factors that can affect your EMI.
Principal
The loan amount or the principal is the primary factor that will determine your EMI. The higher the loan amount, the more your EMIs will be. Paying more towards your house downpayment is one of the best ways to reduce your overall loan burden.
Interest Rate
Interest is the rate you pay when borrowing your loan, which is essentially the cost of your loan. Your interest rate will be determined based on a number of aspects, like your eligibility, credit score, and monthly income.
Tenure
This is the number of years you can repay the loan. The higher the loan tenure, the lesser the EMI amount you need to pay. However, longer tenure loans also have a higher rate of interest.
Processing Fee
This is the fee you need to pay when availing of any home loan. The processing fee is used by the lender towards your loan costs like eligibility processing and credit report evaluation.
Prepayments
If you want to clear off your loan early, lenders usually have a prepayment facility where you can pay a larger sum towards your loan. This can reduce your outstanding principal, which in turn reduces your EMIs.
Using a home loan EMI calculator is the easiest and most accurate way to compute your EMI using these variable factors.
To Conclude
Most home loan schemes offer a competitive interest rate so that borrowers can avail of a loan to buy or construct their dream home with ease. When you apply for a PNB home loan online, you can easily calculate your loan EMI and compare loan schemes to get the best option that fits your home loan needs and offers a comfortable repayment plan.
