Home Loan Calculator: How one can save Rs 50 lakh and 8 years and 3 months on Rs 75 lakh, 30-year home loan with paying additional EMI
Home Loan Calculator: As income increases, a home loan borrower can opt for paying an additional equated monthly instalment (EMI) every year. It can reduce the overall loan interest amount considerably.
Home Loan Calculator: When a loan borrower repays a home loan, they face the problem of paying a larger interest amount than the principal. In loan durations of 20 years and over, the interest amount can surpass the principal amount considerably. It also poses a psychological burden on the borrower as they need to save a substantial amount from their monthly income to repay the loan. But as time passes, the income of the borrower can increase, or they can get income from other sources. They can use that opportunity to repay an extra amount that can reduce not only their interest but also their tenure.
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What is prepayment?
Prepayment is an amount a borrower can repay before the end of the loan tenure. Its purpose is to reduce the loan interest and the overall loan tenure.
How does prepayment reduce interest amount?
When the borrower makes a prepayment, the amount is added to the principal. If one makes a prepayment early in their loan tenure, the interest amount can reduce to a large extent.
What are the types of prepayment?
One can opt for one-time prepayment, partial prepayment, additional EMI every year, or increasing the percentage of EMI every year.
Home loan calculation
We are calculating Rs 75 lakh home loan at 9.5 per cent interest rate for 30 years.
What will be EMI?
The estimated EMI for the loan will be Rs 63,064.
What will be interest and prepayment amounts?
The estimated interest for the loan will be Rs 1,52,03,064, and the estimated repayment will be Rs 2,27,03,064.
When will additional EMI be made?
The additional EMI will be made after 3 years into the loan. So, if the loan is starting from December 2024, the first additional EMI will be made in January 2028, and from there onwards, one additional EMI will be made every year.
What will be new interest amount?
The new estimated interest will be Rs 1,02,72,880.
How much interest will be saved?
The estimated interest saved will be Rs 49,30,182.
What will be new loan tenure?
The loan tenure will be 261 months.
How much time will be saved?
The borrower will save estimated 99 months (8 years and 3 months).