Home Loan EMI Calculations: If you increase your EMI by 8.6%, here's how you can save over Rs 32 lakh and 6 years on Rs 70 lakh, 25-year loan
Home Loan Interest Calculator: If one goes for a higher EMI for their home loan, they can increase a large amount on their interest payment. At the same time, they can also pay off the loan in a shorter duration.
Home Loan Calculator: When people take a home loan, they adjust its equated monthly instalment (EMI) to their earnings. The reason is they have other financial commitments to meet and need money for that. But a little adjustment with their finances, where they stop some of their variable expenses and go for a higher EMI, can help them save lakhs of rupees on their home loans. Know more about how home loan works, and how raising their EMI by 10 per cent, one can save over Rs 32 lakh and 6 years and months on a Rs 70 lakh loan.
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(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
How home loan works
When you take a home loan, which is most likely 15-30 years in tenure, you pay a larger interest than the principal amount on it. The larger the loan, the higher the repayment. Having a short-duration loan can potentially save a substantial amount on interest. Understand it with a few examples.
Rs 50 lakh loan for 15, 20, and 25 years
Let's take the example of a Rs 50 lakh loan at 10 per cent interest for 15, 20, and 25 years.
If one takes it for 15 years, the estimated EMI will be Rs 53,730, the estimated interest will be Rs 46,71,446, and the estimated repayment will be Rs 96,71,446.
Rs 50 lakh loan for 15, 20, and 25 years
If the same person takes it for 20 years, the estimated EMI will be Rs 48,251, the estimated interest will be Rs 65,80,260, and the estimated repayment will be Rs 1,15,80,260.
Rs 50 lakh loan for 15, 20, and 25 years
If the same borrower takes it for 25 years, the estimated EMI will be Rs 45,435, the estimated interest will be Rs 86,30,511, and the estimated repayment will be Rs 1,36,30,511.
So, you can see how estimated interest increased from Rs 96,71,446 to Rs 1,36,30,511 with a 10-year gap.
How one can reduce interest amount
Prepayment is an effective way to reduce the interest amount. One can go for an extra EMI every year or prepay a certain amount after the lock-in period. They can also increase their EMI amount every year or every few years. Such tactics can reduce not only the interest amount but also the loan tenure.
Home Loan calculation
We are taking the example of a Rs 70 lakh loan at a 9.5 interest rate for 25 years. We will see how increasing the EMI amount by 8.6 per cent can save the interest and reduce the tenure.
Home loan EMI for Rs 70 lakh loan
The estimated EMI for this loan will be Rs 61,159.
What will be interest and repayment?
The estimated interest on this loan will be Rs 1,13,47,630, and the estimated repayment will be Rs 1,83,47,630.
If one increases EMI by 8.60%
In that case, instead of a Rs 61,159 EMI, one goes for a Rs 66,419 EMI, see what impact it can make.
If one increases EMI by 8.60%
The estimated interest will reduce from Rs 1,13,47,630 to Rs 81,43,481, and the estimated repayment will reduce from Rs 1,83,47,630 to Rs 1,51,43,481.
How much interest amount will be saved?
The estimated amount saved will be Rs 32,04,149.
What will be new loan tenure?
The estimated loan tenure will reduce from 25 years to 19 years.