Factors that affect your Home Loan EMI
Below are the major factors that affect the EMI of your home loan:
1. Principal Amount
2. Rate of interest
Frequently asked questions
The word EMI stands for ‘Equated Monthly Installment’. It refers to the sum you have to pay every month towards the repayment of your home loan. It includes the principal amount as well as interest. The EMI varies as per the loan amount, interest rate and tenure. You can reduce your home loan EMIs by increasing your tenure. We offer a tenure of up to 30 years.
A home loan EMI calculator is a financial planning tool that assists you to make an informed decision by helping you to estimate EMIs payable towards your home loan, before applying.
As the term rightly suggests, Equated Monthly Instalments (EMI) are due every month, and gradually reduce the principal borrowed throughout the selected tenure. You are obligated to pay your housing loan EMI on a fixed date every month, which is set at the time of loan disbursal. Missing an EMI payment could lead to penal charges, and will also impact your credit score.
Housing loans are one of the most flexible credit options that are available to borrowers, to fund the purchase of a residential property. Often, depending on the borrower’s requirements, the lender can disburse the home loan amount in parts. Till the full loan amount isn’t disbursed to you, you are required to repay only the interest component of the principal loan amount. The amount you pay as the home loan EMI in the meanwhile is also called a home loan pre-EMI.
Borrowers only start paying full home loan EMIs, once the home loan principal amount is fully disbursed to them. Typically, a home loan tenure can stretch up to 30 years, giving borrowers the flexibility of choosing a repayment schedule as per their convenience.
A home loan is a tax-benefit credit option, which is also why many choose to buy a second property as an investment – allowing them to avail of home loan tax benefits through their second home loans as well. There are several tax benefits and concessions attached to paying home loan EMIs, such as:
- Section 80C: You can claim a tax rebate on the principal component of your home loan EMI, up to Rs. 1.5 lakh every year
- Section 24(b): You can claim a tax rebate on the interest component of your home loan EMI, up to Rs. 2 lakh every year
- Section 80EE: You can claim a tax rebate on the interest component of your home loan, after you have exhausted the claimed cap under Section 24(b), up to Rs. 50,000, only if you are a first-time home buyer
Home loan repayment refers to the process of paying back your entire loan (principal plus interest) to the lender over the agreed-to timeframe. Your repayment primarily depends on the selected tenure and the timely payment of your Equated Monthly Instalments (EMI). Your EMI amount depends on the loan amount, the tenure chosen, and the home loan interest rate.
To repay your loan earlier than planned, you will need to make part prepayments or completely foreclose the loan with one lump sum payment. In case you have surplus funds and choose to become debt-free sooner, use our home loan foreclosure calculator to know the sum payable. This is important as a home loan is a sizable sum, which necessitates planning and research.
There are several ways in which borrowers can reduce their home loan EMIs, with Bajaj Finserv. Eligible applicants who meet the home loan criteria can benefit from lower interest rates and longer tenure – bringing down their total cost of borrowing. Here are a few ways to help reduce home loan EMIs:
- Scale up your down payment amount
- Focus on boosting your credit profile and CIBIL score
- Ensure maximum repayment capacity
- Pay off all pending dues and obligations
- Apply with a co-applicant to enhance your home loan application
- Select the right property that passes the lender’s verification
You can also avail of a home loan balance transfer and transfer your pending home loan balance to Bajaj Finserv and repay the rest of your loan amount at a reduced EMI.
An error-free and easy way to calculate interest on your home loan is by using the home loan EMI calculator. All you must do is open the home loan interest rate calculator tool available on the Bajaj Finserv website and enter the fields such as the interest rate, principal amount, and tenure. When you enter all the values correctly, you will not only find out the amount you will pay as interest but also the EMIs and the total loan payable by the end of your tenure.
The home loan amortization schedule is a record of all the periodic payments on your home loan. It is the total tally of loan payments showing the amount of interest and principal contained in each payment until the entire loan is repaid.
The home loan EMI calculator shows you the amortization table, broken down to show you the details of your ongoing home loan interest rate, principal amount, repayment tenure, and balance repayment amount.
The part-prepayment facility on your home loan helps you to reduce your home loan EMIs. By making part-prepayments, you can save substantially on the overall interest payment, as you repay the full amount well before the end of the repayment tenure.
Existing home loan borrowers and new ones all have the same question, which is – what will bring down the cost of borrower faster – smaller EMIs, or a short tenor? There are several points to consider while making that choice.
A home loan is a sizeable financial commitment and taking on one could mean that you will be repaying the loan amount for almost 25 to 30 years of your life. While the home loan repayment is still feasible and can continue along with your other financial developments, one can choose to repay their home loan faster, if their budget and repayment capacity allows for it. Here are two ways to do it:
The amount you pay as home loan EMI is made up of the home loan principal and home loan interest in parts. However, where you stand in your repayment tenure also plays a role in deciding how much of the home loan EMI is composed of the principal amount and how much is the home loan interest.
If you wish to see your EMI break-up, you can do so in two ways:
- Manual calculations
- Home loan EMI calculator
Manual calculations have a wider margin of error, as the formula is complex, and with bigger numbers, one may make mistakes in the calculations. Here is the formula to calculate the same:
Interest component = P x R
P is the pending principal loan amount
R is the home loan interest rate
And then, you can subtract the interest amount out of the EMI, to arrive at the principal component.
To complete these calculations without any errors, make use of an EMI calculator and get error-free results in seconds.