How is monthly mortgage payment calculated?

Monthly mortgage payment = P × r(1+r)^n / ((1+r)^n - 1), where P = principal loan amount, r = monthly interest rate (annual rate / 12), n = total number of months. This is the standard EMI formula used by all banks.

What is amortization?

Amortization is the process of paying off a loan through regular monthly payments. Each payment covers both interest (calculated on remaining balance) and principal. Early payments are mostly interest; later payments are mostly principal. An amortization schedule shows the exact breakdown for every month.

How much home loan can I get on my salary?

Most banks allow a home loan EMI up to 40-50% of your monthly take-home salary. For a ₹60,000 monthly salary, banks may approve up to ₹25,000-30,000 monthly EMI, which translates to approximately ₹25-35 lakh loan at 8.5% for 20 years.

What is the difference between interest rate and APR?

Interest rate is the cost of borrowing the principal. APR (Annual Percentage Rate) includes interest plus all fees (processing fees, insurance, etc.) and represents the true cost of the loan. Always compare APR when shopping for mortgages.

🏠 Home Loan Calculator

Mortgage Calculator

Calculate your monthly mortgage EMI, total interest payable and full amortization schedule. Compare rates and see exactly where every rupee goes.

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Loan amount₹50,00,000

₹1L₹25L₹5Cr

Annual interest rate8.50%

4%12%20%

Loan tenure20 years

1 yr15 yrs30 yrs

💼 Additional costs (optional)

Down payment

₹

Upfront payment

Property tax / yr

₹

Annual property tax

Insurance / yr

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Annual insurance

Monthly EMI —

per month

Total amount paid —

over loan tenure

—Loan amount

—Total interest

—Interest ratio

—Payoff year

—%Interest

📊 What if the interest rate changes?

Amortization schedule

How is mortgage EMI calculated?

The monthly mortgage payment (EMI) is calculated using the standard reducing balance formula. Your payment stays constant each month, but the split between interest and principal changes — early payments are mostly interest, later ones mostly principal.

EMI = P × r(1+r)ⁿ / ((1+r)ⁿ − 1)
P = Principal loan amount
r = Monthly interest rate (annual rate ÷ 12 ÷ 100)
n = Total number of monthly payments (years × 12)

📉 Reducing balance method

Banks calculate interest on the outstanding loan balance each month. As you repay principal, the balance reduces, so the interest portion of each EMI also reduces. This is more borrower-friendly than flat rate loans.

💡 How to reduce interest

1) Make prepayments — even one extra EMI per year reduces a 20-year loan by 3-4 years. 2) Higher down payment. 3) Choose shorter tenure (higher EMI but much less total interest). 4) Negotiate rate reduction after 2-3 years of good payment.

🏦 Fixed vs floating rate

Fixed rate: EMI stays constant for the full tenure. Good when rates are low. Floating rate: EMI changes with market rates (MCLR/REPO linked). Historically, floating rates save money over a 20-year period in India.

📊 Rule of thumb

Your total monthly housing cost (EMI + property tax + insurance) should not exceed 28-30% of your gross monthly income. EMI-to-income ratio above 40% is considered high-risk by most Indian banks.

Frequently asked questions

What is the mortgage EMI for a ₹50 lakh loan?

For a ₹50 lakh home loan at 8.5% for 20 years: Monthly EMI = ₹43,391. Total payment = ₹1,04,14,000. Total interest = ₹54,14,000. You end up paying more than double the loan amount in total! Use a shorter tenure or make prepayments to reduce this significantly.

How does prepayment affect a mortgage?

Prepayment directly reduces your outstanding principal, which dramatically cuts future interest. Example: On a ₹50L loan at 8.5% for 20 years, prepaying ₹5L in year 3 saves approximately ₹8-10L in total interest and reduces tenure by 3-4 years. Most banks allow unlimited part-prepayment on floating rate loans.

What credit score is needed for a home loan?

Most Indian banks require a CIBIL score of 750+ for the best interest rates. Score 700-750: loan approved but at higher rates. Score 650-700: possible with co-applicant or higher down payment. Below 650: very difficult to get approved. Check your CIBIL score before applying.

Is home loan interest tax deductible?

Yes (in India, old tax regime): Section 24(b) allows deduction of up to ₹2 lakh per year on home loan interest for a self-occupied property. Section 80C allows ₹1.5 lakh deduction on principal repayment. For rented property, entire interest is deductible. Note: Under new tax regime, these deductions are not available.