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What Is Home Loan EMI And How Is It Calculated?

07-Feb-2024 | Home Loan

What Is Home Loan EMI And How Is It Calculated?

Home Loan EMI (Equated Monthly Installment) is a fixed monthly payment comprising principal amount and interest, repaying a housing loan. The formula for EMI is: EMI = [P * r * (1 + r)^n] / [(1 + r)^n – 1], where P is the loan amount, r is the monthly interest rate, and n is the loan tenure in months. For instance, a ₹10,00,000 loan with a 5% annual interest rate for 20 years has a monthly EMI of approximately ₹6,599.96.

How to Calculate Home Loan EMI

EMI = P * [r * (1 + r)^n] / [(1 + r)^n - 1]


EMI is the Equated Monthly Installment,     

  • P is the principal loan amount,

  • r is the monthly interest rate (annual rate of interest divided by 12 and expressed as a decimal),

  • n is the loan tenure in months.

What is EMI?

EMI stands for Equated Monthly Installment. It is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. EMIs are used to repay both the interest and principal amount of a loan, ensuring that over a specific number of years, the loan is paid off in full.

In the context of a home loan, the EMI is the monthly payment that a borrower makes to repay the home loan. The EMI consists of two components: principal and interest. The interest component is higher in the initial years, and as the loan is repaid, the interest portion decreases, while the principal repayment increases.

The EMI calculation takes into account the loan amount, interest rate, and loan tenure. It provides borrowers a convenient way to budget their monthly finances as they repay their loan over an extended period.

EMI Break-up

The EMI (Equated Monthly Installment) break-up consists of two main components: principal and interest. When you make a monthly payment towards your loan, a portion of it goes towards repaying the principal amount borrowed, and the other portion goes towards paying the interest charged on the outstanding loan balance.

Here's a brief explanation of the EMI break-up:

  1. Principal Amount: This is the amount you borrowed initially from the lender. Each EMI payment includes a portion dedicated to reducing the principal amount owed. As you continue making payments, the outstanding principal decreases.

  2. Interest Amount: This is the cost of borrowing and is charged by the lender. In the early years of the loan tenure, a significant portion of the EMI goes towards paying the interest. As the outstanding principal reduces over time, the interest component also decreases.

As you progress through the loan tenure, the proportion of the EMI allocated to the principal gradually increases, while the interest portion decreases. By the end of the loan tenure, assuming regular and timely payments, the entire principal amount would be repaid, and the loan would be fully settled.

It's important to note that the EMI amount remains constant throughout the loan tenure, but the proportion allocated to principal and interest changes over time according to the amortization schedule.

What Factors Determine Home Loan EMI

The Equated Monthly Installment (EMI) for a home loan is determined by several factors, and these factors play a crucial role in calculating the monthly repayment amount. Here are the key factors that influence the home loan EMI:    

  1. Loan Amount: The principal amount or the total amount borrowed for purchasing the Home is a significant factor. A higher loan amount will result in a higher EMI, assuming other factors remain constant. 

  2. Interest Rate: The rate of interest charged by the lender is a crucial factor. A higher interest rate leads to a higher EMI, and conversely, a lower interest rate results in a lower EMI. The interest rate is typically expressed on an annual basis.     

  3. Loan Tenure: The duration for which the loan is taken, known as the loan tenure, is a critical factor. A longer tenure may lead to a lower EMI, but it also means paying more interest over the entire loan period. Conversely, a shorter tenure results in a higher EMI but lower overall interest paid. 

  4. Mode of Interest Calculation: Lenders use different methods to calculate interest, such as fixed or floating interest rates. Fixed rates remain constant throughout the loan tenure, while floating rates can change based on market conditions. 

  5. Prepayments and Part Payments: Any prepayments or part payments made towards the loan can impact the EMI. These payments reduce the outstanding principal, potentially leading to a lower EMI or a shorter loan tenure. 

  6. Credit Score: The creditworthiness of the borrower, as indicated by their credit score, can impact the interest rate offered by the lender. A higher a credit score may result in a lower interest rate and, consequently, a lower EMI.

Understanding these factors is crucial for borrowers to assess their repayment capacity and choose a home loan that aligns with their financial goals and capabilities.

It's advisable to use an online EMI calculator to estimate the monthly installment based on these factors.

Calculate EMI using online EMI Calculator

To calculate your home loan EMI with Aavas:

  1. Visit Aavas Home Loan EMI Calculator.

  2. Input the loan amount, interest rate, and tenure.

  3. Receive instant results showing your monthly EMI, total interest, and overall repayment.
    Use this information for better financial planning and decision-making.

  4. Aavas' EMI calculator is a convenient tool to estimate your home loan repayment details quickly and accurately.

Benefits of using Home Loan EMI Calculator

Using an EMI (Equated Monthly Installment) calculator for loans, including home loans, offers several benefits:

  • Accurate Repayment PlanningEMI calculators provide precise calculations of monthly installments based on loan amount, interest rate, and tenure. This accuracy helps borrowers plan their finances more effectively.     

  • Financial Visibility: By using an EMI calculator, borrowers can gain insight into the entire repayment structure, including the principal and interest components. This visibility assists in understanding the financial commitment over the loan tenure.     

  • Budgeting Tool: EMI calculators help individuals budget their finances by providing a clear picture of the monthly cash outflow towards loan repayment. This allows borrowers to align their expenses with their income more efficiently.     

  • Quick Decision Making: EMI calculators provide instant results, allowing borrowers to make quick and informed decisions regarding loan amounts, tenures, and interest rates. This speed is beneficial when considering various loan scenarios.     

  • Prepayment Analysis: For borrowers considering prepayments or part payments on their loans, an EMI calculator helps analyze the impact on the overall repayment amount and tenure. This information assists in making decisions about accelerating loan repayment.     

  • User-Friendly Interface: Most EMI calculators are user-friendly, requiring only basic inputs such as loan amount, interest rate, and tenure. This simplicity makes it accessible to a wide range of users.     

  • Avoiding Surprises: EMI calculators prevent surprises by providing a clear breakdown of the monthly payment structure. Borrowers can anticipate and plan for fluctuations in their financial commitments over time.

In summary, an EMI calculator is a valuable tool that empowers borrowers with financial clarity, aiding in effective planning, budgeting, and decision-making throughout the loan repayment process.


In conclusion, understanding the concept of Home Loan Equated Monthly Installment (EMI) is paramount for individuals navigating the complex terrain of homeownership. EMI serves as the cornerstone of loan repayment, representing a regular and predictable financial commitment. The calculation of EMI involves a nuanced interplay of factors such as the loan amount, interest rate, and tenure.

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