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LoansJagat Team
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7 Min
29 May 2025
How To Calculate Home Loan EMI in 2025 – Step-by-Step Guide
Let’s say Ankit, a 32-year-old IT professional from Pune. He took a home loan of ₹50 lakhs at an interest rate of 8.5% for 20 years, paying an EMI of ₹43,391. After a year, he received a ₹5 lakh bonus. Instead of splurging, he made a part prepayment, which brought his EMI down to ₹40,158.
Later, he made a balance transfer to another bank offering 7.5% interest, which further reduced his EMI to ₹37,912. He even linked his loan with an overdraft account, using idle cash to cut interest. Isn't that smart?
Key Tricks Ankit Used:
- Part prepayment to reduce EMI
- Switched to a lower interest rate
- Used an overdraft account for interest savings
Sounds like a brilliant plan, doesn’t it? Let’s explore how you can do the same!
What Is a Home Loan EMI?
For Example, every month, Rahul pays a fixed EMI of about ₹42,500 to the bank. This EMI includes both the loan amount (principal) and the interest charged by the bank. In the first year, Rahul pays around ₹4.2 lakhs in interest, and only ₹1 lakh goes toward reducing the actual loan.
As years pass, more of Rahul’s EMI starts paying off the loan principal, and less goes to interest. In the later years, Rahul’s monthly payments mainly reduced the loan amount itself.
Read More – Is 2025 the Best Year to Take a Home Loan
This way, Rahul steadily pays off his home loan, paying the same amount each month without any surprises.
Key Points:
- EMI = Fixed monthly payment
- Early EMI: More interest, less principal
- Later EMI: More principal, less interest
- Calculated based on loan amount, rate, and tenure
Year | Interest Paid (₹) | Principal Paid (₹) | Total EMI Paid (₹) |
1 | 4,20,000 | 1,00,000 | 5,20,000 |
10 | 2,50,000 | 2,70,000 | 5,20,000 |
20 | 30,000 | 4,90,000 | 5,20,000 |
What are the Factors That Affect Your Home Loan EMI?
Let’s say Priya wants to buy a house that costs ₹60,00,000. She plans to borrow ₹50,00,000 from the bank. Because Priya has a good credit score, the bank offers her a low interest rate of 7.5%. She chooses to repay the loan over 15 years, so her monthly payment (EMI) is about ₹45,000.
If her credit score were lower, the bank might charge 9% interest, and her EMI would increase to ₹53,500. If she takes 20 years to repay, her EMI drops to ₹40,000, but she pays more interest overall.
The loan amount, interest rate, tenure, and credit score mainly decide her EMI.
Key Factors Affecting Home Loan EMI
- Loan Amount
- Interest Rate
- Loan Tenure
- Credit Score
- Income & Employment Stability
- Age
- Property Location & Value
- Type of Interest Rate (Fixed/Floating)
- Processing Fees & Charges
- Loan-to-Value (LTV) Ratio
The table that explains each factor clearly
Factor | How It Affects EMI | Example/Impact |
Loan Amount | Higher loan increases EMI as the principal to be repaid grows | ₹50L loan → EMI ₹45,000; ₹70L loan → EMI ₹63,000 |
Higher rate raises EMI; more interest in each payment | 7.5% interest → EMI ₹45,000; 9% interest → EMI ₹53,500 | |
Loan Tenure | Longer tenure lowers EMI, but total interest paid rises | 15 years → EMI ₹45,000; 20 years → EMI ₹40,000, but more interest overall |
Credit Score | Better score secures lower interest → lower EMI | Score 750+ → 7.5% rate; Score 600 → 9% rate |
Income & Employment | Stable income → better loan terms and interest rates | High, stable income → easier loan approval and lower rates |
Age | Older borrowers get shorter tenure → higher EMI | Age 30 → 20-year tenure; Age 55 → 10-year tenure → higher EMI |
Property Location | Prime locations get better LTV & rates | City centre → 90% LTV, 7.5% rate; Remote area → 70% LTV, 8.5% rate |
Interest Type (Fixed/Floating) | Fixed = EMI stable; Floating = EMI can vary with rates | Fixed 7.5% → ₹45,000 EMI steady; Floating starts 7.5%, can rise or fall |
Processing Fees/Charges | Adds to upfront loan cost, affecting affordability | ₹50,000 fee increase overall loan cost, impacting the budget |
Loan-to-Value (LTV) Ratio | Higher LTV means bigger loan vs property value → EMI rises | 90% LTV → larger loan & EMI; 70% LTV → smaller loan & EMI |
What is an EMI Calculation Formula?
1. EMI Calculation Using a Mathematical Formula:
You can easily calculate your EMI using a standard formula by plugging in the right values. Here’s the formula:
EMI=P×R×(1+R)N−1(1+R)N
Where:
- P = Principal loan amount
- R = Monthly interest rate = (Annual interest rate ÷ 12) ÷ 100
- N = Total number of monthly instalments (loan tenure in months)
This formula gives you a fixed monthly repayment amount that includes both interest and principal. Just enter your loan amount, interest rate, and tenure to calculate how much you’ll pay every month.
2. EMI Calculation Using Excel
You can also calculate your EMI quickly using Excel. Excel has a built-in function called PMT (Payment), which helps you compute monthly installments. Here’s the formula:
=PMT (R, NPER, PV)
Where:
- R = Monthly interest rate (Annual rate ÷ 12)
- NPER = Total number of monthly payments (loan tenure in months)
- PV = Present value or principal loan amount
Example:
If you're taking a loan of ₹5,00,000 at 8% annual interest for 20 years, use:
=PMT(8%/12,240,−500000)
This will return your monthly EMI.
(Note: The principal is entered as a negative value to reflect outgoing payments.)
How to Calculate Home Loan EMIs Using an Online Calculator?
If you want a quick and easy way to calculate your home loan EMI, online calculators are your best bet. Most banks and financial websites offer free tools for this purpose. Here's how to use one:
- Go to the website of your chosen bank or financial institution.
- Find their Home Loan EMI Calculator tool.
- Enter the loan amount, interest rate, and loan tenure.
- Click on the "Calculate" button.
In seconds, you'll see your monthly EMI along with a detailed breakdown of interest and principal. These tools are fast and straightforward, helping you plan your finances with confidence.
For example, if you enter a ₹40 lakh loan, an 8% interest rate, and a 20-year tenure, the calculator instantly shows your EMI—around ₹33,458 per month. It also displays the total interest payable, helping you plan your loan easily and accurately.
What are the Benefits of Calculating Home Loan EMI?
Let’s say Ramesh plans to buy a home and uses an online EMI calculator before applying for a ₹40,00,000 loan at 8% interest over 20 years. The calculator shows him a monthly EMI of ₹33,458. Seeing this figure, he realises his current rent plus EMI would exceed his ₹60,000 budget, so he adjusts the tenure to 25 years. The new EMI of ₹32,165 fits comfortably.
Also Read – 2025 Home Loan Interest Rate Comparison
Key Pointers:
- Affordability Check: Know Your Maximum EMI Before Choosing a Loan.
- Offer Comparison: Easily compare EMIs for different interest rates and tenures.
- Prepayment Planning: See how extra payments cut interest and shorten tenure.
Benefit | Description | Example |
Helps set realistic monthly budgets | ₹32,165 EMI fits in ₹60,000 budget | |
Informed Loan Decisions | Compare rates/tenures to pick the best deal | 8% for 25 yrs → EMI ₹32,165 vs 20 yrs ₹33,458 |
Streamlined Application | Determines optimal loan amount and avoids over-borrowing | Chooses ₹40,00,000 instead of ₹45,00,000 for comfort |
Tips to Manage and Reduce Your Home Loan EMI
Sneha took a ₹50,00,000 home loan at an interest rate of 8.5% for 20 years. Her EMI was around ₹43,400. After a year, she received a bonus of ₹5 lakhs. Instead of spending it, she made a part prepayment. This reduced her EMI to ₹40,200.
Later, she switched to another bank offering 7.5% interest, which brought her EMI down to ₹37,500. She also linked her loan to an overdraft account—any idle money in her savings now automatically reduces her interest.
Tip | How It Helps |
Opt for a Longer Tenure | Reduces monthly EMI burden |
Make a Bigger Down Payment | Lower loan amount and EMI |
Go for Balance Transfer | Get a lower interest rate from another bank |
Prepay When Possible | Cut interest and EMI |
Negotiate for a Lower Rate | Even 0.5% can save thousands monthly |
Use Step-Down EMI Plan | Pay higher early, lower later |
Link Loan to Overdraft Account | Idle money reduces interest automatically |
Consolidate High-Interest Loans | Save by combining costlier loans into your home loan |
Conclusion
To sum up, knowing your home loan EMI helps you plan better and avoid money stress. You can calculate it using a formula, Excel, or an online tool. Factors such as loan amount, interest rate, and loan tenure affect your EMI. Smart moves, such as part prepayment, balance transfer, or linking to an overdraft, can help reduce it. Use these tips to pay less and manage your home loan easily!
FAQs
Q1: How can I reduce my home loan EMI?
You can reduce your EMI by making part prepayments, switching to a lower interest rate, or linking your loan to an overdraft account.
Q2: What factors affect my home loan EMI?
EMI depends on the loan amount, interest rate, tenure, credit score, and your income stability.
Q3: What is the easiest way to calculate home loan EMI?
Use an online EMI calculator by entering your loan amount, interest rate, and tenure.
How to Guides – Investing, Trading & Wealth Building | ||
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LoansJagat Team
We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?
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