How to calculate your Home Loan EMI

A big part of getting a home loan is the EMIs that you have to pay for years and years afterwards. Equated Monthly Installment, also known as EMI is the part payment that you have to make to your lender bank every month. Your EMI consists of a part of the principal amount, plus the agreed rate of interest on your loan. The bank gives you a statement, stating the amount to be paid as your EMI; a lot of people do not know how to calculate EMI on their loans. There is no special home loan EMI calculator that tells you how much you have to pay every month. As a result they often feel that their banks are overcharging them.

If you’re one of those people then don’t worry, we’re here to tell you how to calculate your EMI with ease. Let’s take the example of Mr.X, who took a house loan for Rs. 5 lacs for a period of ten years, at the rate of 10.5%. He pays a monthly EMI of Rs 6,747. The bank calculates this EMI for him, and he feels he’s cheated. Here is an easy way for Mr.X to calculate his EMI.

The easiest way is to use a mathematical formula that has been derived to calculate EMIs. The formula reads, EMI = [P x R x (1+R)^N]/[(1+R)^N-1]. The P stands for the principal amount of your loan, R is the interest rate per month and N is the number of monthly installments to be paid.

Another way to calculate home loan EMI is with the help of Microsoft Excel Sheets. The formula used here is called the PMT. For this formula you need three variables, the rate of interest, the number of periods (nper) and the value of the loan. This formula is used universally for this purpose and when in doubt you can use it to calculate your own EMI. There isn’t any scope for error since it’s all done by a computer, which acts as your home loan EMI calculator.

So the next time you have to make an EMI payment, just use these formulas and you should be sorted.