Home Loan Calculator: How you can save nearly Rs 16 lakh and 4 years on Rs 50 lakh, 25-year loan
Let’s understand how one can save approximately Rs 16 lakh in interest and reduce your home loan tenure by 4 years on a Rs 50 lakh, 25-year loan.
A home loan offers an affordable way to fulfil one's dream of owning a house. It is a financial commitment, that is repaid through EMIs. With strategic planning and a disciplined repayment approach, one can save considerable interest and they can also shorten their loan period. For example, on Rs 50 lakh home loan with a 25-year tenure, individuals can reduce the overall interest burden by approximately Rs 16 lakh and cut the loan term by 4 years. Let’s understand how one can achieve it.
Photos source: Pixabay/Representational
(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)
What is a home loan?
A home loan is a type of loan provided by banks, financial institutions, and non-banking financial companies to help individuals buy their dream home.
Understanding the concept of longer the loan period, higher the interest
If you opt for longer loan tenure, your EMI will be lower. But in this case, you will also have to pay higher interest. However, if you have opted for a shorter tenure, you have to pay a higher EMI, but in this case, you will pay lower interest.
Long vs short tenure
When it comes to home loans, most people opt for longer tenures and lower EMIs to stay within their comfort zone. However, a slight adjustment to your repayment plan could save you a significant amount of money and time.
Why choose a shorter tenure?
Shorter tenures lead to reduced overall interest payments.
Paying off the loan early gives financial freedom sooner.
Enables individuals to channel funds into other investments earlier.
Home loan conditions
We are taking the example of a Rs 50 lakh home loan. The interest rate will be 9.50 per cent and the loan duration will be 25 years.
What will be your EMI on Rs 50 lakh loan for 25 years?
On Rs 50 lakh loan for 25 years at a 9.50 interest rate, the estimated monthly EMI amount will be Rs 43,685.
What will be your total interest on Rs 50 lakh loan in 25 years?
The estimated total interest in 25 years will be Rs 81,05,450 on a Rs 50 lakh loan.
What will be your total repayment amount on Rs 50 lakh loan in 25 years?
The total estimated repayment amount will be Rs 1,31,05,450.
Understanding long vs short tenure
At a 25-year tenure, the EMI is approximately Rs 43,685, and the total interest paid over the period can be approximately Rs 81,05,450.
Now, if you reduce the tenure to 21 years, the EMI increases to Rs 46,047 (just Rs 2,362 more). However, the total interest paid drops significantly to approximately Rs 64,65,661.
What will be your EMI on Rs 50 lakh loan in 21 years?
On a Rs 50 lakh loan for 21 years at a 9.50 interest rate, the estimated monthly EMI will be Rs 46,047.
What will be your total interest on Rs 50 lakh loan in 21 years?
The total estimated interest in 21 years will be Rs 64,65,661 on Rs 50 lakh loan.
What will be your total repayment amount on Rs 50 lakh loan in 21 years?
The total estimated repayment amount will be Rs 1,14,65,661.
How much money you will save?
The estimated amount saved because of an increase in EMI will be approximately Rs 16,39,789. On the other hand, the time saved will be 4 years.