The Different Methods Of Calculating Home Loan EMI

Most first time borrowers are under assumption that calculating home loan EMI is easy. All you need is a housing loan EMI calculator. You have to agree with that. It does seem like if you have EMI calculator for home loan, all you need to do is enter right numbers. But, believe it or not it is more complex than that. Here are two reasons. Firstly, lots of factors in the equations remain unaccounted for. Secondly, EMI calculator will not help you get the specifics you actually need. So, here are three common methods.

Manual Calculations:

Most of the formulae for home loan EMI calculations are available online. You can easily note them down and calculate EMI as per repayment option, home loan tenure, etc. The ease of doing them manually depends on your mathematics skills. But, most websites do offer an example in order to assist readers calculate home loan EMI. This process is the most tedious one. But, there are few high-level calculations you cannot see with online tools. For example, EMI as per balloon repayment option. Manual calculation is the way to go.

Online calculations:

Most borrowers are familiar with online EMI calculators. Thing is, there are a lot of housing loan EMI calculators in India. All of them do not offer real help. Some are just an online version of basic mathematical calculator. Yet, it does simplify your job, especially if you are not a maths geek. But, there are some efficient EMI calculators for home loan. They support your calculations well with several additional online tools like amortization table. DHFL has one of the best EMI calculators in housing finance industry.

Computer Calculations:

You can use excel sheets on a computer to get the job done. It will be as good as some of the Property Loan Emi Calculator. But, with basic asthmatics skills and few formulae, you can check the basic structure of repayment options too. However, it is not as good as some of the advanced online tools.

Either way, the best method for your calculations is the one that give accurate results instantly. Housing Loan EMI Calculator is a great choice but not for more customized calculations. However, you will need to know the following before you calculate the EMIs and other details. For example, cost of property, processing charges, stamp duty, legal fees, and realistic interest rates. This information can be made available to you when you meet a relationship manager for the same. Even a third-party personal finance consultant is a great person to meet for these details.

{Source: http://homeloanemicalculatorblogs.blogspot.in/2016/09/the-different-methods-of-calculating.html}

HOME LOAN CALCULATOR TO GAIN TAX BENEFITS

As per the provisions of income tax act you can claim exemption for the repayment of interest as well as principal. But there are certain limits to get exemption for interest and principal repayment. To know your tax exemption on home loan repayment you need to first understand how interest is calculated, and that’s where Quicko’s Home Loan Interest Calculator comes into the picture. Following is the illustration showing two components of your EMI i.e. interest and principal.

How does this Home Loan Calculator Work?

Praveen’s yearly income is Rs.10, 00,000. His age is 30 years. He is purchasing a house worth Rs.50, 00,000 and availed a loan for Rs.40, 00,000. Loan tenure is 15 years and interest rate is 10.5%. Following is his loan repayment/amortization schedule.

From this schedule, in our Home Loan Interest Calculator we can see that for initial years major component of EMI is interest and payment towards principal is very little. The graphical presentation of the same data shows interest as well as principal payment due after every year. The next column in the table after interest column shows your tax savings every year based on your income slab. While calculating tax benefit, growth in your income at 3.5% per annum is considered.

If we look at the total amount for interest we can see that, at current interest rate for 15 years you end up paying as much interest as your borrowing amount. If you increase the tenure, total interest payment increases.

Let’s understand how this repayment schedule is prepared in this Home Loan Interest Calculator. On your first EMI payment interest on your borrowing is calculated for one month. This interest amount is deducted from EMI. The difference is considered as your payment towards principal. So for the next month interest is calculated on your reduced principal due after last month’s payment towards principal.

One can pay more than the EMI or can pay a lump sum whenever they have excess income or saving to reduce the interest payment. The amount you pay beyond your EMIs goes towards the repayment of principal amount and it reduces interest outgo in subsequent payments.

{Source: https://quicko.com/blog/tax-benefit-home-loan-calculator/}