Home Loan Calculations: How you may save Rs 50 lakh in interest on Rs 70 lakh, 25-year loan by increasing your EMI by 5% every year

Home Loan Calculations: When we take a home loan, we commit to repayment for a long term. It can be anywhere from 15 years to 30 years. Initially we adjust the equated monthly instalment (EMI) amount to our monthly income.

Mostly, we keep it at a level where we can complete all our financial obligations along with repaying the EMI on our own.

For initial years, we may find it difficult to strike a balance between spending for our expenses and the EMI repayment.

But as our income rises, repaying the EMI can be an easier task for us.

If we get a good increase in our salary every year, we may increase the EMI amount yearly.

In this write-up, through projections, we will show how you may save Rs 50 lakh in interest and 11 years and 10 months in duration on a Rs 70 lakh, 25-year loan by increasing your EMI amount by 5 per cent from the second year of loan. 

Home Loan conditions

We are taking the example of a Rs 70 lakh home loan at a 9.5 per cent interest rate for 25 years.

What will be EMI and interest?

The estimated EMI for this loan will be Rs 61,159, the estimated interest will be Rs 1,12,03,519, and the estimated repayment amount will be Rs 1,82,03,519. 

When will we increase EMI amount?

As per our story, for the 1st year, the estimated EMI amount will be Rs 61,159, for the 2nd year, it will be Rs 64,217 (starting from the 13th month), for the 3rd year, it will be Rs 67,428 (starting from 25th month), the amount will keep increasing every year by 5 per cent till the loan is paid off completely.

Amortization schedule for loan

Amortization schedule for after 5% EMI increase

How much amount you may save

The estimated amount saved will be Rs 49,73,221. 

How much time you may save

The estimated time saved will be Rs 142 months (11 years and 10 months).

(Disclaimer: This is not loan repayment advice. Do your own due diligence or consult an expert for financial planning.)