Home Loan

Home Loan EMI’s Principal and Interest Breakup


Home Loan EMI’S Principle and Interest Breakup

House is a necessity for everybody. Some own it. Some rent it. You need a lot of money to buy or build a new home. Not everybody has lump sum amounts in the bank. A home loan or housing loan is a facility given to such people. People can take loans, build a house and return it on easy EMIs. This is a long-term process. The period for a large amount is huge. It can take years to pay it off. 

What is the Home Loan Principle Amount?

This is the total amount of the loan. The interest is calculated on this amount. The period is also decided by taking it in the term. The more the principal amount, the more is interest. The same goes for time. However, the principal amount for home loans or housing loans has to be big. For example- 300,000 rupees.

Example to Understand

If you want to buy a property in a city for 1 crore INR, and the bank agrees to give you a loan for 90% and 10% is to be paid as a down payment. So in this case, you are eligible to get a loan of 90 lakhs. This will be considered your principal amount. The remaining 10 lakhs will be given in the form of a down payment.

What is the Home loan Interest Amount?

This is the extra money paid. The interest may vary. It can be different for different banks. It can also differ for states. The banks usually give offers to people for loans. They give loans and earn a lot. It is like a long-term investment for them. The amount they give, they get back. They also get a lot of money in form of interest. They can even take the property of the person if he or she fails to return the money within a given time. To save yourself from interest, the best option is to reduce the period. Prepayment of loans can be useful too. The amount for prepayment can be calculated easily. It is calculated by a home loan prepayment calculator.

What is EMI?

EMI: Its full form is equated to a monthly instalment. It is payable when you take a loan. You have to pay EMI every month. You have to continue paying until the principal amount dissolves. The EMI has 2 sections of money. One is the principal amount and the other is interest. The breakup of the amount gives EMI to be paid. The period is also fixed. Even the date on which the EMI is to be paid is fixed. 

Formula to calculate EMI-

The EMI on a home loan can be easily calculated by the formula-

P x R x (1+R)^N / [(1+R)^N-1] 

In the above-given formula,

  1. P stands for the Principle amount of the loan.
  2. N stands for the number of months (period for which the loan is taken)
  3. R stands for Interest

This work is easily done by the home loan EMI calculator.

Example of EMI payment-

You take a home loan for 30 lakhs for 20 years. The EMI would be 28,950 rupees per month. In the first EMI, 25,000 rupees is interest and 3,950 rupees is deducted from the principal amount. As time passes, the interest decreases and the principal amount increases. After 100 months, the interest would be around 19,000 and the principal amount would be around 9,000. After 100 more months, the interest would be around 8,000 and the principal amount would be around 20,000. 

This is how the Home Loan emi’s Principal and Interest Breakup occur over time. 

This is calculated using EMI calculators.

Explanation: (Principle and Interest Breakup)

The breakup of money in both sections is transparent. Longer the period, more the interest. Hence, more money is to be paid. If you look deep down, most of the money at the start of EMI goes to the interest section. After a few months, the actual principal amount reduces. The EMI is the same throughout but the fact is the breakup of money. The period of repayment can be reduced. This will save interest. The EMI increases as the period decrease. But the amount payable on interest is less. So if you can afford it, do it. It is a better option to pay more for lesser time. The other option is to pay less for a longer time. The amount payable in the second option is much more. Many people choose the second one because of the lesser salary. People also have other bills and expenses. Because of this, they choose to pay less. But if possible, choosing the first option is better. Because it helps in saving money, lesser interest means less amount to be paid. 

Pre-payment of Long Tenure Loans-

The pre-payment amount on the home loan or housing loan can be calculated easily by using the home loan EMI calculator. The interface it provides is user-friendly. It is very easy to use. It gives real-time results. The accuracy is 100%. All this work is possible online. This also saves time for people.

How can pre-payment help?

  1. The amount for pre-payment is in your own hands.
  2. It reduces the principal loan amount.
  3. Now, the interest decreases.
  4. The interest which was taking a major part of EMI in the initial years is now reduced.
  5. This means lesser EMI.
  6. More stability.
  7. Management of money.
  8. Time management (as the period has also reduced).
  9. Satisfaction.
  10. Great outputs.

Home Loan EMI’s Principal and Interest Breakup are specified. The methods to decrease the interest are also given. The user can himself or calculate the breakup of EMI. This is possible by EMI calculators available online. Using them is very easy. They help in giving the best results and also help people to choose the best option. Doing research can be proven strategic in the matter of finance.