How your EMI is calculated
Banks use the reducing-balance method: each month, interest is charged only on the amount you still owe, and the rest of your EMI pays down the loan.
EMI = P × r × (1 + r)n ÷ [(1 + r)n − 1]
P is the loan amount, r is the monthly rate (annual rate ÷ 12 ÷ 100) and n is the number of months.
For ₹50 lakh at 8.5% over 20 years, r is 0.0070833 and n is 240, so the EMI is ₹43,391. In the first year, about ₹4.21 lakh of your EMIs goes to interest and only ₹99,511 to the loan itself.
Finish sooner or lower the EMI?
Keeping the EMI the same and finishing sooner usually saves more interest. In the example above, ₹1 lakh a year from year 2 saves ₹16.52 lakh if you shorten the tenure, against ₹8.57 lakh if you lower the EMI instead. Lowering the EMI makes sense when you need more room in your monthly budget.
RBI rules don't allow lenders to charge prepayment penalties on floating-rate home loans taken by individuals. Fixed-rate loans can carry a fee, so check your loan agreement.
Questions people ask
Will my bank's EMI match this exactly?
It should be within a few rupees. Small differences come from rounding, the date your first EMI starts, or interest charged for the days before your first full EMI.
Does a prepayment change my EMI automatically?
Many lenders shorten the tenure and keep the EMI the same unless you ask otherwise. Tell your lender which option you want when you prepay.
Should I prepay or invest the money?
It depends on your loan rate, the return you expect, your tax situation and how much emergency cash you keep. Compare both for your own numbers before deciding.
Are my numbers saved anywhere?
No. Everything is calculated in your browser. A share link carries the numbers in the link itself, not on our servers.
Method and sources
Monthly reducing balance at the annual rate ÷ 12. Prepayments are applied after that month's EMI. One-time and yearly prepayments are made at the end of the chosen year; monthly ones start in that year. Results are estimates, not an offer from a lender. How we calculate.
Last reviewed 22 Oct 2026 by the WealthFeedz team.