How is home loan EMI calculated?

EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where r is the monthly rate and n the months. ₹50 lakh at 8.5% for 20 years gives ₹43,391 a month.

Which saves more interest: a shorter loan or a lower EMI?

Keeping the EMI and shortening the loan saves more, because the principal falls faster. In the example, ₹1 lakh a year saves ₹18.6 lakh that way and ₹9.6 lakh by lowering the EMI.

Can the lender charge for prepaying a home loan?

Not on a floating-rate loan taken by an individual for a purpose other than business. A fixed-rate loan can carry a prepayment charge set in its agreement.

Why is most of the early EMI interest?

Interest is charged on what you still owe, which is largest at the start. In the example, the first year’s EMIs pay ₹4,21,182 of interest and ₹99,511 of principal.

Does the calculator include processing fees and insurance?

No. It covers the loan and its interest only; processing fees, insurance and other charges are extra.

Home Loan EMI Calculator with Prepayment: Interest Saved

Type the loan, the rate and the period. See the EMI, the total interest and what you still owe each year, and what a prepayment would save.

How to use it

Type the loan amount, the yearly interest rate and the period in years.
To see what prepaying does, type an extra amount you would pay every year and the year it starts, a one-time amount and its year, or both.
Pick what happens after a prepayment: the same EMI and a shorter loan, or the same period and a lower EMI.

You get the EMI, the total interest and the total paid, when the loan ends, the interest a prepayment saves, a chart of what you still owe, and the principal and interest for each year.

The EMI formula

EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the loan, r the monthly rate (the yearly rate ÷ 12 ÷ 100) and n the number of months. Each month’s interest is the monthly rate on what you still owe, and the rest of the EMI repays principal. Early on most of the EMI is interest; towards the end most of it is principal.

Worked example

A ₹50,00,000 loan at 8.5% a year for 20 years:

Monthly rate: 8.5 ÷ 12 ÷ 100 = 0.708%. Months: 240.
EMI: ₹43,391.
Year 1’s EMIs pay ₹4,21,182 of interest and only ₹99,511 of principal.
Over 20 years you pay ₹1,04,13,879, of which ₹54,13,879 is interest.

What prepaying does

Paying ₹1,00,000 extra at the end of every year, with the EMI unchanged, ends the same loan in 14 years instead of 20 and brings the interest down to ₹35,58,489: ₹18,55,389 saved for ₹13,00,000 prepaid. Keeping the 20 years and lowering the EMI after each prepayment instead saves ₹9,58,553. A prepayment early in the loan saves more than the same amount later, because it removes principal that would have carried interest for longer.

Rules worth knowing

Prepayment charges: under RBI rules, lenders cannot charge an individual for prepaying or closing a floating-rate loan taken for a purpose other than business. A fixed-rate loan can carry a charge set in the loan agreement.
Floating rates move: when the rate changes, the lender changes the EMI or the period, so one rate for 20 years is an estimate.
Tax: under the old tax regime, interest on a loan for a house you live in is deductible up to ₹2 lakh a year, and principal repaid counts towards the ₹1.5 lakh deduction. The new tax regime gives neither for a house you live in.

The calculator leaves out processing fees, insurance and other charges, and counts prepayments at the end of each year, after that year’s 12 EMIs.

Questions people ask

How is home loan EMI calculated?: EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where r is the monthly rate and n the months. ₹50 lakh at 8.5% for 20 years gives ₹43,391 a month.
Which saves more interest: a shorter loan or a lower EMI?: Keeping the EMI and shortening the loan saves more, because the principal falls faster. In the example, ₹1 lakh a year saves ₹18.6 lakh that way and ₹9.6 lakh by lowering the EMI.
Can the lender charge for prepaying a home loan?: Not on a floating-rate loan taken by an individual for a purpose other than business. A fixed-rate loan can carry a prepayment charge set in its agreement.
Why is most of the early EMI interest?: Interest is charged on what you still owe, which is largest at the start. In the example, the first year’s EMIs pay ₹4,21,182 of interest and ₹99,511 of principal.
Does the calculator include processing fees and insurance?: No. It covers the loan and its interest only; processing fees, insurance and other charges are extra.

Home loan EMI calculator