What is Home Loan EMI?

Home Loan EMI (Equated Monthly Installment) is the fixed amount you pay every month to repay your housing loan. Each EMI consists of two parts: principal repayment and interest payment. In the initial years, the interest component is higher, which gradually decreases as you pay down the principal.

How Home Loan EMI is Calculated

The EMI is calculated using the following formula:

EMI = [P × R × (1+R)^N] / [(1+R)^N – 1]

Where:

P = Principal loan amount
R = Monthly interest rate (Annual rate ÷ 12 ÷ 100)
N = Loan tenure in months

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Pro Tip

Consider making part-prepayments whenever you have surplus funds. Even small prepayments can save lakhs in interest over the loan tenure.

Example Calculation

For a home loan of ₹50 lakhs at 8.5% interest for 20 years:

Monthly EMI: ₹43,391
Total Interest: ₹54,13,879
Total Payment: ₹1,04,13,879

Factors Affecting Home Loan EMI

1. Loan Amount

Higher the loan amount, higher will be your monthly EMI. Consider making a larger down payment to reduce the loan amount.

2. Interest Rate

Even a small difference in interest rate can significantly impact your total interest outgo. Compare rates from multiple lenders.

3. Loan Tenure

Longer tenure means lower EMI but higher total interest. Shorter tenure means higher EMI but lower total interest.

Tips to Reduce Your Home Loan EMI

Higher Down Payment: Pay more upfront to reduce the loan amount
Negotiate Interest Rate: Compare offers and negotiate with your bank
Choose Shorter Tenure: If affordable, opt for shorter tenure
Make Prepayments: Use bonuses or savings to make part payments
Consider Balance Transfer: Transfer to a bank offering lower rates

Home Loan Eligibility Criteria

Banks typically consider the following factors:

Age: 21-65 years (at loan maturity)
Income: Minimum ₹25,000/month for salaried individuals
Employment: Minimum 2-3 years of work experience
Credit Score: 700+ for best rates
Property value: Loan typically covers 75-90% of property value

Tax Benefits on Home Loan

Home loan borrowers can claim the following tax benefits:

Section 80C: Deduction up to ₹1.5 lakh on principal repayment
Section 24(b): Deduction up to ₹2 lakh on interest payment for self-occupied property
Section 80EEA: Additional ₹1.5 lakh for first-time buyers (conditions apply)

Home Loan EMI Calculator