It is highly essential to know the affordability of your loan before you sign up. This is because the installments which you pay not only consists of the principal amount but also the interest which has to be paid to the lender. Thus, calculating the installment which will be incurred in advance helps in estimating your overall obligation on the loan so that you can adjust your monthly budget accordingly. Here are thus some of the easy ways by which you can calculate your Home Loan EMI amount in advance -
Using an Excel Sheet
An Excel spreadsheet is the good old way of computing your Home Loan installments. To do this, you can include a function called PMT which gives the result based on 3 parameters which are - the rate of interest, tenor in months, and the principal amount. Thus, the parameters can be tweaked for various amounts to find out the corresponding installment.
There is a simple formula for calculating the Home Loan installment which is:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
P denotes the principal
R for the rate of interest calculated on a monthly basis
N for the tenor in months
Even though results obtained here are accurate, the process can be slow and cumbersome. Moreover, there is also room for error considering the manual intervention.
Read Also: The Different Methods of Calculating Home Loan EMI
Most lenders these days offer a Home Loan EMI calculator. This is a highly accurate and quick method wherein you just need to enter the principal amount, tenor and the rate of interest and the results get displayed in seconds.
Apart from an EMI calculator, most leading lenders also offer attractive interest rates along with loan amount of up to Rs. 3.5 crores which can be repaid back in 20 years. So choose your lender carefully.
Aman Khanna is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has an MBA in finance from Toronto University as well as years of experience delivering seminars on sound financial practices and debt management.