Home Loan Calculator: How 1 additional EMI each year can save Rs 40.54 lakh in interest and 85 months in tenure on Rs 75 lakh, 30-year loan; see calculations
Home Loan Calculator: Prepayment plays a key role in home loan repayment. Lump sum, part payment, or one additional equated monthly investment (EMI) can considerably reduce the loan interest burden on a borrower.
Home Loan Calculator: Big-ticket home loans have become the norm given the fast-rising prices of real estate. Because of that, equated monthly instalments (EMIs) of loans have also become quite high, and the loan tenure stretches up to 30 years. In such a long duration, the interest a borrower pays surpasses the principal amount. Some of the ways to reduce the interest amount can be prepayment or additional EMI. Such prepayments are added to the principal amount, so the overall interest amount reduces significantly. Know more about how prepayment works and how one can save estimated Rs 40.53 lakh in interest and 7 years and 1 month in tenure on a Rs 75 lakh, 30-year home loan.
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(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
What is prepayment in home loan?
It is a payment that a borrower can pay other than the regular EMI of the loan. Banks generally have a 3-year lock-in period before a borrower can make a prepayment. The prepayment can be one-time or can be in yearly instalments. Since one pays a higher interest amount than the principal in the initial years of the home loan, prepayment in the first half of the loan repayment can help one save a substantial amount on interest.
How additional EMI helps
An additional EMI is also a type of prepayment. Sometimes, when the borrower knows that they can't repay a large sum, they can opt for an additional EMI every year. If they go for it, not only do they save interest, but they can also slash the loan tenure.
Home loan calculations
For our home loan, we are taking the example of a Rs 75 lakh home loan, where the interest rate will be 9.50 per cent, and the loan tenure will be 30 years. The processing fee of the loan will be 0.5 per cent of the loan amount, Rs 37,500.
What will be EMI?
The estimated EMI in such a case will be Rs 63,064.
What will be interest and repayment?
The estimated interest will be Rs 1,52,03,064, and the estimated repayment will be Rs 2,27,03,064.
When will additional EMI be started?
The additional EMI will be started 3 years after the borrower's EMI starts. For a loan that started in November 2024, the first additional EMI of Rs 63,064 will be paid in December 2027, and from thereon, it will be paid every year in the same month.
What will be reduced interest amount?
After one additional EMI, the new estimated interest will be Rs 1,11,50,406.
How much money will be saved?
The estimated interest saved will be Rs 40,52,658.
What will be new tenure?
The loan will be repaid by September 2047.
How much time will be saved?
It means the loan will be repaid in 7 years and 1 year less than the original schedule of October 2054.