Every individual aspires to own a house. Previously, it took years for homebuyers to save money and purchase their dream house. Nowadays, several leading financial institutions offer home loans with flexible terms and conditions to help aspiring homeowners buy a house. Furthermore, equated monthly instalments in a home loan make repayment easier.
So, if you plan to avail a home loan of around Rs. 10 lakhs, first you must know the process to calculate Rs. 10 lakhs home loan EMI to plan your repayment accordingly.
Calculate Rs. 10 Lakhs Home Loan EMI Using Mathematical Formula
You can manually calculate EMI for a home loan of Rs. 10 lakhs using the following mathematical formula:
EMI = [P x R x (1+R) ^ n] / [(1 + R) ^ n – 1]
EMI is equivalent Equated Monthly Instalment
P refers to the principal amount
R refers to the interest rate
N refers to the repayment tenure in months
Mentioned below is an example to help you understand this better:
Suppose you have borrowed Rs. 10 lakhs at an interest rate of 7.2% (0.006% per month), and the repayment tenure is 10 years (or 120 months), then you need to pay a monthly instalment of around –
EMI = [10,00,000 x 0.006 x (1+0.006) ^120] / [(1+0.006)^ 120-1] = Rs. 11,714
Note that this is an approximate calculation of a home loan EMI. The actual amount is subject to change.
If you find manual calculation cumbersome, then use a home loan EMI calculator to evaluate the EMI of your home loan.
Calculating Rs. 10 Lakhs Home Loan EMI Using Home Loan EMI Calculator
Here’s a step-wise guide on how to use a home loan EMI calculator to calculate Rs. 10 lakhs home loan EMI:
Step 1: Visit the website of your prefered financial institution offering this online tool.
Step 2: Click on the home loan EMI calculator.
Step 3: Enter the required details, such as tenure, loan amount, and home loan interest rate, to get the result within a few minutes.
Using a home loan EMI calculator removes the chances of human errors common in manual calculation and gives an accurate result within a few minutes. You can also use it anytime and anywhere, according to your requirement, without worrying about usage restrictions.
Calculating Rs. 10 Lakhs Home Loan EMI Using Excel Sheet
You can use an excel spreadsheet to calculate the EMI for a home loan of Rs. 10 lakhs. Here, three variables of a home loan are considered – interest rate, loan amount and period. Note that you must evaluate the interest rate on a monthly basis.
For instance, if the interest rate is 7.2% per annum, it should be calculated as 7.2%/12, which equals 0.006%.
Period refers to the number of monthly instalments or EMIs payable towards your home loan.
To calculate EMI on an excel sheet, choose the symbol ‘=’ and enter PMT (interest rate, loan amount and period) and select ‘Enter’. The excel sheet will provide an amount in negative value. This is the cash flow in the form of EMI that you need to pay toward your home loan.
So, suppose you borrowed Rs. 10 lakhs at an interest of 7.2% for 10 years, then the formula on an excel sheet to evaluate EMI will be as follows –
=PMT(7.2%/12, 120, 1000000)
Factors Impacting Rs. 10 Lakhs Home Loan EMI
Mentioned below are a few factors that impact the EMI of a home loan of Rs. 10 lakhs:
- Principal or loan amount
The principal in a home loan is the loan amount borrowed from a financial institution. It directly affects EMIs payable towards a home loan. Therefore, a higher loan amount means higher EMIs.
- Rate of interest
An interest rate determines the borrowing cost of a loan and directly affects your home loan EMI payments. This means that a higher interest rate translates into higher EMIs.
- Repayment tenure
The repayment tenure of a home loan is inversely proportional to your EMI payments. This implies that a longer tenure leads to lower EMI payments and vice-versa.
- Credit score
Having a credit score of 750 or above while applying for a home loan will benefit you to get a lower interest rate as it proves your creditworthiness or ability to repay the loan on time. Besides, a lower interest rate reduces the burden of paying hefty EMIs.
- LTV ratio
Lenders use LTV or Loan to Value ratio to determine the risk associated while lending a home loan. A higher LTV ratio means that you have borrowed a substantial loan amount compared to what is required. This leads to a risk of default in repayment, and the lender may charge a higher interest rate which means you need to pay a higher EMI amount.
So, if you wish to buy a home worth Rs. 10 lakhs, keep all these pointers about Rs. 10 lakhs home loan EMI in mind so that you can plan your finances effectively and repay the loan without any hassle.