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EMI, prepayment and balance transferChecked 12 November 2026

How EMI is calculated: the formula with a worked example

See the home loan EMI formula step by step, work through a full example, and learn which inputs move your monthly payment most before you speak to a lender.

Last checked: 12 November 2026. Rates, fees and rules change; check the linked sources before you act.

Every home loan repayment in India is quoted as an EMI, an equated monthly instalment. It looks like a single number on a sanction letter, but it is the result of a short formula. Once you can see the formula, you can check a lender's quote, compare offers fairly and see what a rate change would do to your budget.

The three inputs

An EMI depends on only three things:

  • Principal (P): the amount you borrow, not the price of the flat.
  • Monthly rate (r): the annual interest rate divided by twelve, written as a decimal.
  • Number of instalments (n): the tenure in months.

Everything else on a loan offer, such as processing fees, insurance or legal charges, sits outside the EMI. Those costs matter, but they do not change the monthly instalment itself. The guide to home loans explains the other charges.

The formula

The reducing-balance formula used on bank calculators is EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), the same relationship HDFC Bank sets out on its public calculator page (HDFC Bank EMI formula, checked 12 November 2026). Written another way, EMI = P × r ÷ (1 − (1 + r)^−n). Both forms give the same answer.

The formula has one job. It finds the single monthly payment that, if paid every month, clears both the interest and the whole principal exactly at the end of the tenure.

Home loan EMI calculatorEstimate monthly repayment, total interest and yearly loan balances with an editable rate and tenure.Open

A worked example

Take a loan of ₹60 lakh at an annual rate of 8.5% for 20 years, which is 240 monthly instalments. The rate is an assumption chosen for the example, not a current offer from any lender (Showcasia EMI calculator, checked 12 November 2026).

  1. Monthly rate: 8.5 ÷ 12 ÷ 100 = 0.0070833.
  2. Growth factor: (1 + 0.0070833) raised to the power 240 comes to about 5.44.
  3. EMI: 6,000,000 × 0.0070833 × 5.44 ÷ (5.44 − 1) gives about ₹52,069 a month (Showcasia EMI calculator, checked 12 November 2026).

Over 240 months you would pay about ₹1.25 crore in total, of which about ₹65 lakh is interest. That is more than the amount you borrowed, which is normal for a 20-year loan at this rate (Showcasia EMI calculator, checked 12 November 2026).

Where the first EMI goes

In month one, interest is charged on the full ₹60 lakh: 6,000,000 × 0.0070833 is about ₹42,500. The rest of the ₹52,069 EMI, about ₹9,569, reduces the principal (Showcasia EMI calculator, checked 12 November 2026).

Next month the balance is slightly lower, so the interest part is slightly lower and the principal part slightly higher. That slow shift is why the outstanding balance falls gently in the early years and much faster towards the end. After five years of payments in this example, about ₹52.9 lakh is still owed (Showcasia EMI calculator, checked 12 November 2026). Our guide to the amortisation schedule walks through the full table.

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Which input moves the EMI most

Keeping the ₹60 lakh loan the same, here is what happens when you change one input at a time (Showcasia EMI calculator, checked 12 November 2026):

  • Rate 7.5% instead of 8.5%, 20 years: EMI about ₹48,336 and total interest about ₹56 lakh.
  • Rate 9.5% instead of 8.5%, 20 years: EMI about ₹55,928 and total interest about ₹74.2 lakh.
  • Tenure 15 years at 8.5%: EMI about ₹59,084 and total interest about ₹46.4 lakh.
  • Tenure 25 years at 8.5%: EMI about ₹48,314 and total interest about ₹84.9 lakh. Figures from the Showcasia EMI calculator, checked 12 November 2026.

Two lessons stand out. A one-point change in rate shifts the EMI by a few thousand rupees but the total interest by many lakhs. A longer tenure lowers the EMI but raises the total cost sharply. Our guide on tenure versus EMI looks at that trade-off in detail.

Why your lender's figure may differ slightly

Small differences between your own calculation and a bank's quote usually come from three places:

  • Rounding. Banks round the EMI, often to the nearest rupee, and adjust the last instalment.
  • Broken-period interest. If the loan is paid out mid-month, the lender may charge interest for the days before the first full EMI cycle.
  • Rate resets. On a floating-rate loan, the rate in your first month may not be the rate in month twelve.

Ask the lender for the repayment schedule and the Key Fact Statement before you sign. Those two documents show the exact EMI, the rate type and every charge.

Using this before you house-hunt

Work backwards from the EMI you are comfortable paying, then see what loan and price range that supports. Run your own numbers in the EMI calculator and the home affordability calculator, then search homes for sale in Pune or read the Pune area guides with a realistic budget in mind. More guides on repayments sit in the EMI and prepayment topic.

Work it out for yourself

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Questions people ask

Is the EMI the same every month?

On a fixed rate it stays the same until the loan ends. On a floating rate the lender can change the rate when its benchmark moves, and then either the EMI or the remaining tenure changes. Your loan agreement says which one the lender adjusts first.

Why does so little of my early EMI reduce the loan?

Interest is charged on the balance still owed. At the start the balance is at its highest, so the interest part of each EMI is at its largest and the principal part is small. The split shifts towards principal every month.

Do lenders use exactly this formula?

The standard reducing-balance formula is the one banks publish on their own calculators. Your actual payment can still differ slightly because of rounding, the date the first EMI falls due and any interest charged for the days before the first full month.

Does the EMI include insurance, maintenance or property tax?

No. The EMI only repays the loan. Budget separately for society maintenance, property tax, home insurance and any loan-linked insurance premium.

Sources

  1. Home loan EMI formula and calculator, HDFC Bank, checked 12 November 2026.
  2. Reproduce the Showcasia EMI example, Showcasia, checked 12 November 2026.

This is general information, not legal, tax or financial advice. Check with a qualified professional for your case.

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