How to calculate pre EMI?

Three years back, I took a home loan of Rs. 50 lakhs from SBI for an under-construction property in Pune. Since the home loan amount was disbursed in installments based on the progress of construction, I was confused about how to calculate pre-emi interest.

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I learned that pre-emi interest is paid only on the amount disbursed so far, not the full loan amount. So, when the bank released more amount, my pre-emi changed. The pre-emi is calculated only on the disbursed amount and interest rate, and not the home loan tenure.

My home loan amount was: 50 lakhs

Interest Rate: 8.50% per annum

Loan Tenure: 20 years

Pre-EMI Period: 24 months 

My home loan disbursement amount and my Pre-EMI calculation:

      1. Months 1-6:

Disbursed Amount: Rs 10,00,000

Formula: (Rs 10,00,000 × 8.5%) ÷ 12 = Rs 7,083 per month

1. Months 7–12:

Cumulative Disbursed Amount: Rs 25,00,000

Pre-EMI: (Rs 25,00,000 × 8.5%) ÷ 12 = Rs 17,708 per month

1. Months 13–18:

Cumulative Disbursed Amount: Rs 40,00,000

Pre-EMI: (Rs 40,00,000 × 8.5%) ÷ 12 = Rs 28,333 per month

1. Months 19–24:

Final Disbursed Amount: Rs 50,00,000

Pre-EMI: (Rs 50,00,000 × 8.5%) ÷ 12 = Rs 35,417 per month

Total Pre-EMI Paid Over 24 Months: Rs 5,312,504

This amount includes only the interest paid during the pre-EMI period, and it does not include any repayment towards the principal. 

Thus, I have clearly explained how Pre-EMI works and how to check your Pre-EMI at the disbursal stage.

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• Firstly, we need to divide the annual interest rate by 12 to get the monthly interest rate.
• Then, multiply that by the disbursed amount to get the monthly pre-EMI interest.
• At last, multiply the monthly pre-EMI by the number of months in the pre-EMI period to get the total interest amount.

So after going through all the previous answers, you must have an idea about how to calculate pre EMI amount. However, let me explain this for you. Banks and other financial institutions offer pre-EMIs as a repayment plan for home loans for buildings that are still under construction. Under this plan, you won't be required to pay back the loan's principal while the property is being built. Rather, you will only be required to make EMI payments for the loan's interest component. Pre-EMI is the term for this interest-only payment.

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How to Calculate Pre EMI Interest for Home Loan?

The formula for Pre EMI calculation are as follows:

1. Pre EMI Interest: Loan amount * Monthly Interest Rate

2. Total Pre EMI Amount: Pre EMI Interest * Number of Months

3. Total Repayment Amount: Loan Amount + Total Pre EMI Amount

So you can use these formulas to calculate your Pre EMI payment. I hope this clarifies your doubt.

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Read More:

Pre EMI vs Full EMI Meaning and Difference?

I can share with you the formulas on how is pre EMI calculated. There are 3 steps to do the calculation so let me share an example to help you understand the concept better.

How to Calculate Pre Emi on Home Loan?

To calculate the pre-EMI, you will need to follow three formulas to get the answer and they are:

• Pre-EMI interest = Loan amount * Monthly interest rate

• Total pre-EMI amount = Pre-EMI interest * number of months

• Total repayment amount = Loan amount + Total Pre-EMI amount

Suppose you borrowed Rs 1,00,000 at an interest rate of 12% for a pre-EMI period of 3 months

1. Loan amount (principal) = Rs 1,00,000 

2. Monthly interest rate = 12%/ 12 = 1% or 0.01 

3. Number of months = 3

4. Pre-EMI interest = Rs 1,00,000 * 0.01 = Rs 1,000 (for each month)

5. Total pre-EMI amount = Rs 1,000*3 = Rs 3,000

6. Total repayment amount = Rs 1,00,000 + Rs 3,000 = Rs 1,03,000

So for the pre-EMI of 3 months, you will have to pay a total of Rs 3,000 as interest before the regular EMIs.

This is how to calculate pre EMI interest for home loan. You can just put your values and use these formulas to get your answer.

Read More:

As far as I know, pre-EMI is the interest that you pay on the disbursed amount of your home loan before the construction of your property is complete. If you are wondering

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how pre EMI is calculated on home loan,

it is typically calculated on a monthly basis and is lower than the EMI that you will pay after the construction is complete. This is because you are only paying interest on the amount that has been disbursed to the builder so far, and not on the full loan amount.

How to Calculate Pre EMI of Home Loan?

To calculate pre-EMI, you will need to know the following:

• The loan amount

• The interest rate

• The loan tenure

• The amount that has been disbursed so far

The following formula can be used to calculate pre-EMI:

Example:

Let's say you have taken a home loan of ₹10 lakh for a tenure of 10 years at an interest rate of 8%. The builder has disbursed ₹5 lakh to you so far.

Your pre-EMI would be calculated as follows:

Pre-EMI = (1000000 * 0.08 * 500000) / (12 * 10) = ₹3333.33

You would need to pay ₹3333.33 in pre-EMI every month until the construction of your property is complete. After the construction is complete, you will start paying EMI on the full loan amount.

Pre-EMI can be a good option for borrowers who want to reduce their overall interest burden on the loan and get a lower EMI amount after the construction is complete. However, it is important to weigh the benefits and drawbacks of pre-EMI before making a decision.

Now you know

how pre EMI is calculated on home loan.

Pre-EMI (Equated Monthly Installment) is an alternative that a borrower can opt for, like when taking on a home loan for property construction. During the construction period, the borrower does not start paying the regular EMIs, which include both principal and interest components. Instead, they are required to pay only the interest on the disbursed loan amount until the construction is complete and the entire loan amount is disbursed. The concept of what is pre emi calculator for home loan is also simple. Let me simplify the meaning here.

How pre emi is calculated?

To calculate the pre-EMI amount, you'll need the following information:

• Loan amount: The total amount of the loan sanctioned by the bank or financial institution.

• Pre-EMI period: The period during which you'll be paying only the interest and not the principal. This period typically lasts until the construction is completed or until a specified time is agreed upon with the lender.

• Interest rate: The annual interest rate offered by the bank on the loan.

The formula to calculate the pre-EMI interest is as follows:

Pre-EMI Interest = (Loan Amount * Interest Rate * Pre-EMI period in months) / (12 * 100)

Suppose you take a home loan of Rs 100,000 at an annual interest rate 8% for 12 months

Pre-EMI Interest = (100,000 * 8 * 12) / (12 * 100) 

Pre-EMI Interest = (100,000 * 8 * 12) / 1200 

Pre-EMI Interest = 960,000 / 1200 

Pre-EMI Interest = Rs. 800

So this is how you calculate pre emi interest home loan.

Read More:

Pre EMI is not a popular concept among middle class home buyers like me. I booked a flat in a residential project by Godrej and the property was still under construction. The bank asked if I would like to opt for the Pre EMI option or normal EMI. I was completely clueless and needed their help understanding first what it was and the whole calculation based on it. I asked them how to calculate pre EMI interest for home loan. The executive helped me out. I will give you my case and you can see if that helps you.

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To help you understand, I will simply talk numbers.

Suppose my bank disburses Rs. 4 lacs initially and the interest rate is 7%. The pre EMI will be calculated as 

400000 x 7% / 12

Which will come to Rs. 2334 per month

If the bank disburses another Rs. 400000 in the next 6 months, the pre EMI will go to Rs. 4667. This is how to calculate pre EMI amount.

So the thing is that pre EMI will keep increasing as much loan amount is disbursed before completion of under construction property. And you have to pay Pre EMI till that time period. After that normal EMI and home loan principal repayment will begin.

I thought it was a bad idea for me but I came to know that investors who want to sell property as soon as they get possession opt for Pre EMI options.

I hope this helps you a little better in understanding how to calculate pre EMI interest on home loan. Let me know what are your thoughts on the same.