Owning a home is a dream for many. To realize this dream, people spend a lot of time and effort saving money. Another alternative for them is to apply for a home loan. Now, applying for a home loan needs a little bit of research. You must know which bank to choose for home loan, what should be the home loan amount and interest rate, how to calculate home loan interest and much more. In this answer, I will take you through the process of home loan interest calculation and how home loan is calculated.
We should understand home loan interest depends on the loan amount, and loan tenure, repayment schedule. If you are wondering how home loans are calculated, and how to calculate home loan interest, one of the most popular ways is opting for fixed interest rates. When you have a fixed interest rate, it is easy to calculate EMI you will be paying. Here is the formula:
P x R x [(1+R)^n) / (1-(1+R)^n)],
Here P = Principal outstanding
R = Monthly rate of interest
N = Number of monthly instalments
Suppose you take a loan of Rs. 4500000 at the interest rate of 7.50% for 20 years, here is how EMI calculation will be
= 4500000 x 0.62 x [(1+0.62)^240) / (1- (1+0.62)^240]
= Rs. 36,252
Therefore, total interest payable will be Rs. 42,00,310
Another way of calculating home loan interest is via floating interest rates. As the name suggests, floating interest rates are not fixed. Only the loan amount and loan tenure is fixed, the interest rate fluctuates. The interest rate is strictly decided based on the following factors:
Repo rate
Government’s monetary policies
Inflation rate
Fiscal deficit
Global and foreign interest
Note: There are many online calculators that enable you to check EMI, loan interest amount and overall payable amount easily by entering principal amount, rate of interest and loan tenure.
I hope now you understand how to calculate home loan interest.
Calculate the amount of home loan that you are eligible to avail of through this,
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Housing loan interest is the cost that a borrower pays to a lender for the privilege of borrowing money to purchase a home. It is an annual percentage rate (APR) and is a significant component of the overall cost of homeownership. While availing of a home loan I came to understand how to calculate housing loan interest as well. There are several online calculators available but its better to be aware of the formula as well. Here is what I know about how do you calculate home loan interest.
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How to calculate home loan interest?
Rajinder
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May 4, 2021
2021-05-04T18:58:06+00:00 2021-06-11T15:31:02+00:00Comment
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Home Loan
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