Home loan EMI calculator:
see where every payment goes

What a home loan EMI covers

On a standard fixed-rate, reducing-balance loan, the EMI has two parts: interest on the outstanding balance and repayment of the principal you borrowed. The total stays level, but the two parts do not. Early payments are mostly interest, and later payments repay more principal.

Your actual monthly outflow may include insurance, maintenance, fees or other charges. The formula here covers loan principal and interest only.

The monthly schedule showing that split is called an amortization schedule, and it is the most useful thing to ask your lender for.

The calculation also assumes a fixed rate. On a floating-rate loan, a change in the lender's benchmark changes either the EMI or the number of months, so the schedule has to be recalculated each time. Check which one your lender adjusts.

The EMI formula for a reducing-balance loan

1. 1Enter the amount you actually borrow, not the property price.
2. 2Convert the quoted annual interest rate into a monthly decimal.
3. 3Turn the tenure into months.
4. 4Calculate the EMI, then multiply by n for the total paid and subtract P for the total interest.

A useful rule of thumb comes from the same formula. At 8.5% over 20 years, the EMI is about ₹868 for every ₹1 lakh borrowed. Over 15 years it is about ₹985 per lakh, and over 25 years about ₹805 per lakh.

Example: ₹30 lakh at 8.5% for 20 years

The monthly rate is 0.085 ÷ 12 ≈ 0.7083%. In month 1 the interest is ₹30,00,000 × 0.085 ÷ 12 ≈ ₹21,250. Of the ₹26,035 EMI, only about ₹4,785 repays principal.

Because you pay interest of about ₹32.5 lakh on a ₹30 lakh loan, you repay more than twice the amount you borrowed. That is the cost of the 20-year tenure at this rate.

The amortization schedule: how the split changes

The interest part falls from about ₹21,250 to near zero, and the principal part rises over the same period. After five years you have paid about ₹12.06 lakh in interest and repaid only about ₹3.56 lakh of the principal.

The principal part first exceeds the interest part around month 143, almost twelve years in. After ten years, about 70% of the loan, ₹20.99 lakh, is still outstanding, even though you have made 120 payments.

This is why a loan feels as if it barely moves in the early years. Roughly 80% of the first year's payments goes to interest, which is also why prepaying early is so effective.

The interest and principal parts may be treated differently for tax benefits, so the split matters beyond the arithmetic. Check the current rules and your eligibility before you assume a deduction.

The trade-off: 15, 20 or 25 years

Moving from 20 to 25 years lowers the EMI by about ₹1,878 but adds about ₹9.99 lakh of interest. Moving from 20 to 15 years raises the EMI by about ₹3,507 and saves about ₹9.31 lakh.

Pick the shortest tenure whose EMI you can sustain with an emergency fund intact. A longer loan can usually be shortened later by prepaying, but a shorter loan's higher EMI is hard to lower once you have committed to it.

When you compare lenders, compare total interest as well as the EMI. Two offers with the same EMI can differ in tenure, and a lender offering a lower EMI may simply be giving you a longer loan.

How extra payments change the schedule

Extra money directed at principal reduces future interest, because interest accrues on a smaller balance. How it is applied depends on your lender and instruction: some shorten the tenure with the same EMI, others recalculate a lower EMI.

Suppose you prepay ₹1,00,000 after the twelfth EMI and keep the EMI unchanged. The loan ends about 18 months earlier and saves roughly ₹3,70,386 in interest. A ₹3,00,000 prepayment at the same point ends it about 48 months early and saves about ₹9,62,214.

Timing matters. The same ₹1,00,000 prepaid after ten years shortens the loan by only about 8 months and saves roughly ₹1.27 lakh, against 18 months and ₹3.70 lakh when paid after the first year. Money works hardest when the balance is largest.

Small regular extras work as well. An extra ₹2,000 every month shortens the 240-month loan to about 202 months and saves about ₹6,13,186.

• Ask whether an extra payment is applied to principal immediately.
• Check whether the EMI or the remaining tenure changes.
• Compare any prepayment charges with the interest you would save.
• On a floating-rate loan, model more than one rate, because a rate rise changes the EMI or the tenure.

Mistakes when calculating a home loan EMI

• Entering the property price instead of the loan amount.
• Using the annual rate without dividing by 12.
• Comparing EMIs without comparing the total interest.
• Forgetting that a rate rise of one percentage point raises this ₹30 lakh loan's EMI by about ₹1,929 a month.
• Assuming prepayment always reduces the EMI; it may instead shorten the tenure.

Before you sign, ask your lender four things: how interest is calculated (monthly or daily on the balance), whether the rate is fixed or floating, how prepayments are applied, and what fees apply to closing the loan early.

To work out how large a loan your income can carry, see the home affordability guide. The car loan guide applies the same formula to a shorter loan, which shows how quickly the principal share rises on a five-year schedule.