Smart Financing: Mastering Home Loan Amortisation with Ease

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Opting for a loan might appear a daunting task for borrowers initially. However, lenders try to make the loan process as simple and transparent as possible. One method of making loan payments transparent for borrowers is the loan amortisation schedule. 

The home loan amortisation provides a clear timetable of the loan amount and EMIs. This schedule also enables borrowers to calculate the total interest amount to pay throughout a loan’s tenor. With proper calculation, one can decide whether to close a loan faster by paying extra amounts. Usually, if a loan has a low-interest rate and the applicant wants to avail certain benefits, it will then be beneficial to continue with the loan till its full tenor. 

Read this blog to learn in detail about home loan amortisation, its components, use of home loan amortisation calculator and more.  

What is a home loan amortisation schedule?

A home loan amortisation is the details of the breakup of principal and interest components of an EMI. For any loan EMI, its interest part remains highest during the earlier years and keeps on decreasing over the tenor. As the tenor of a loan reaches its end, the principal component increases. Over this entire period, the EMI account remains constant. 

Borrowers can get this home loan amortisation schedule in loan-related paperwork. The entire repayment schedule here is outlined along with the proper division of repayment amount and interest components. 

What are the components of a home loan amortisation schedule?

A home loan amortisation schedule includes all basic information about a loan and the procedure for repaying it. Borrowers can know about this schedule by using a lender’s EMI calculator before they apply for home loan. The summary of loan repayment is mentioned either at the bottom or in a completely separate section. 

Following are the different components of a home loan amortisation schedule:

  • Instalment number: A serial number is provided with the payment of each EMI along with payment details mentioned in corresponding rows.
  • Due date: This is the last date for paying EMIs to avoid late payment charges or penalties.
  • Closing principal: This portrays the remaining principal amount after paying out the EMI of each month.
  • Outstanding principal: A housing loan amortisation schedule depicts the principal amount each month during the repayment tenor of a home loan.
  • Interest component: A home loan amortisation schedule displays the interest component of each EMI, which continues to decrease with each instalment.
  • Principal component: The amount from each EMI utilised to repay the principal outstanding is the principal component.

How is a home loan amortisation calculated?

Generally, borrowers can view their home loan amortisation in the form of a table. For home loan amortisation calculation, borrowers use a lender’s home loan EMI calculator. Here, they need to enter the housing loan details such as amount of loan, rate of interest, and tenor for computing such data. 

A home loan amortisation calculator is an ideal way of checking out the scheduled payments for any given loan. This makes financial planning easier for the borrowers. The Home Loan EMI calculator also provides the ideal time for availing a home loan balance transfer facility. 

What are the benefits of a home loan EMI calculator?

Using a home loan EMI calculator, it is possible to get a quick estimate of the EMI for any given loan amount along with its tenor and rate of interest. One would need to provide only some necessary details to acquire the result. This calculator also provides a clear understanding of any financial charges including the total interest to be paid and processing fees. 

Besides checking the EMI calculator and amortisation schedule, borrowers should check pre-approved loans offered by various lenders. These are offered for home loans, loans against property, etc. Borrowers can check their eligibility for these offers from the official website entering their names and all relevant details. 

To conclude, a home loan amortisation calculator helps in listing regular payments made on a loan. Because it shows the breakup of principal and interest components, it becomes easier for borrowers to keep track of repayment principal amounts. At the same time, borrowers can also gain detailed insights into the interest components and change loan providers if the home loan interest rate paid is high.

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