How to calculate home loan EMI, with an example

Steps

1. Take the loan amount: the property price minus your down payment. Here it is ₹50,00,000.
2. Turn the yearly rate into a monthly rate: 8.5 ÷ 12 ÷ 100 = 0.00708.
3. Turn the tenure into months: 20 years × 12 = 240.
4. Put the three numbers into the EMI formula, or enter them in the home loan calculator, to get ₹43,391.
5. Multiply the unrounded EMI by the months to see the total repaid, ₹1,04,13,879, and subtract the loan to see the interest.

What changes the EMI most: tenure and rate

On the same ₹50,00,000 at 8.5%, a 10-year loan has an EMI of ₹61,993 and costs ₹24,39,141 in interest. At 15 years the EMI is ₹49,237 and the interest ₹38,62,656. At 20 years it is ₹43,391 and ₹54,13,879. At 25 years it is ₹40,261 and ₹70,78,406.

The rate matters too. Keep the 20 years and move the rate: at 7.5% the EMI is ₹40,280, and at 9.5% it is ₹46,607. A single percentage point is worth about ₹3,000 a month on a loan this size.

Why the first instalments are mostly interest

Interest is charged on what you still owe. In month one you owe the full ₹50,00,000, so the interest is 50,00,000 × 0.085 ÷ 12 = ₹35,417. Out of the ₹43,391 EMI only ₹7,974 repays the loan.

Each month the balance falls a little, the interest falls with it, and a bigger share of the same EMI goes to principal. This is why a part-payment in the early years saves far more than one near the end.

What the EMI does not include

The formula covers principal and interest only. Processing fees, insurance, valuation charges and any prepayment charge are separate, and a lender’s own schedule can differ by a few rupees because of rounding and the date of the first instalment. On a floating-rate loan, ask your lender whether a rate change alters your EMI or your tenure.