How to calculate home loan interest?

Owning a home is a dream for many. To realize this dream, people spend a lot of time and effort saving money. Another alternative for them is to apply for a home loan. Now, applying for a home loan needs a little bit of research. You must know which bank to choose for home loan, what should be the home loan amount and interest rate, how to calculate home loan interest and much more. In this answer, I will take you through the process of home loan interest calculation and how home loan is calculated. We should understand home loan interest depends on the loan amount, and loan tenure, repayment schedule. If you are wondering how home loans are calculated, and how to calculate home loan interest, one of the most popular ways is opting for fixed interest rates. When you have a fixed interest rate, it is easy to calculate EMI you will be paying. Here is the formula: P x R x [(1+R)^n) / (1-(1+R)^n)], Here P  = Principal outstanding R = Monthly rate of interest N = Number of monthly instalments Suppose you take a loan of Rs. 4500000 at the interest rate of 7.50% for 20 years, here is how EMI calculation will be = 4500000 x 0.62 x [(1+0.62)^240) / (1- (1+0.62)^240] = Rs. 36,252 Therefore, total interest payable will be Rs. 42,00,310 Another way of calculating home loan interest is via floating interest rates. As the name suggests, floating interest rates are not fixed. Only the loan amount and loan tenure is fixed, the interest rate fluctuates. The interest rate is strictly decided based on the following factors:

• Repo rate
• Government’s monetary policies
• Inflation rate
• Fiscal deficit
• Global and foreign interest

Note: There are many online calculators that enable you to check EMI, loan interest amount and overall payable amount easily by entering principal amount, rate of interest and loan tenure. I hope now you understand how to calculate home loan interest. Calculate the amount of home loan that you are eligible to avail of through this, [widget_homeLoan_checkEligibility_form]  

Recently, one of my friends asked

how to calculate housing loan interest.

As everyone mentioned, here is the basic formula for calculating the loan interest:

EMI=P×r× (1+r) ^n/ (1+r) ^n−1 

Where:

• P

  = Loan principal or amount borrowed

• r

  = Monthly interest rate (annual rate divided by 12 and converted to a decimal)

• n

  = Loan tenure in months

How to Calculate the Home Loan Interest?

Let’s see how can you find out the home loan interest within a minute:

• Determine Principal Amount (P): This is the loan amount you have borrowed from the bank.

• Interest Rate (r): Use the annual interest rate provided by the bank and convert it to a monthly rate by dividing by 12 and converting it into decimal form. For example, if the annual interest rate is 8.5%, the monthly interest rate would be: r=8.5/12×100=0.00708  

• Loan Tenure (n): The total tenure or duration of the loan is expressed in months. For a 20-year loan, this would be 240 months.

• EMI Calculation: Plug the values of P, r, and n into the formula to calculate the monthly EMI. This EMI includes both the principal and interest components. As the loan progresses, the interest portion reduces, while the principal portion increases.

• Interest Amount: The interest paid over the loan tenure can be calculated by subtracting the principal from the total payments (EMI × n).

For example, for a Rs 30 lakh loan at 8.5% interest for 20 years, you can calculate the EMI using the above formula. This is what I informed my friend when he asked

how do you calculate home loan interest

​.

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How to Calculate Home Loan EMI

 

 

Housing loan interest is the cost that a borrower pays to a lender for the privilege of borrowing money to purchase a home. It is an annual percentage rate (APR) and is a significant component of the overall cost of homeownership. While availing of a home loan I came to understand how to calculate housing loan interest as well. There are several online calculators available but its better to be aware of the formula as well. Here is what I know about how do you calculate home loan interest.

How to Calculate the Home Loan Interest?

The formula to calculate the interest rate on home loan is:

Interest = (Principal Amount x Rate of Interest x Time)/100.

Here's an example to help you understand how the formula works:

Suppose a person has borrowed Rs. 3 lakh for a home loan with an annual interest rate of 4.5% for a period of 20 years. So the interest rate in that case will be 

Interest = (300,000 x 4.5 x 20)/100

= 270,000/100

= 2,700

If you are wondering how is home loan interest calculator in HDFC, you can visit the link:

https://www.hdfc.com/home-loan-emi-calculator

.

Calculate your EMI in seconds using NoBroker’s EMI Calculator

Read More:

What is the Home Loan Interest Rate of AGI? How to avoid part period interest in SBI Home loan? What is part period interest in SBI home loan? How to pay extra EMI for home loan?