{"id":27813,"date":"2023-07-28T12:07:32","date_gmt":"2023-07-28T06:37:32","guid":{"rendered":"https:\/\/www.fundsindia.com\/blog\/?p=27813"},"modified":"2023-08-03T17:52:56","modified_gmt":"2023-08-03T12:22:56","slug":"demystifying-home-loan-emis-what-they-dont-tell-you","status":"publish","type":"post","link":"https:\/\/www.fundsindia.com\/blog\/mf-research\/demystifying-home-loan-emis-what-they-dont-tell-you\/27813","title":{"rendered":"Demystifying Home Loan EMIs: What They Don’t Tell You"},"content":{"rendered":"\n
\"\"<\/a><\/figure><\/div>\n\n\n\n

This article was originally published in financial express. Click\u00a0<\/span><\/em>here<\/em><\/span><\/a>\u00a0to read it<\/span><\/em><\/p>\n\n\n\n

Do you have a home loan outstanding or are you planning to take a home loan?<\/p>\n\n\n\n

<\/div>\n\n\n\n

If \u2018Yes\u2019, do you really understand the nuances of how a home loan EMI works? <\/strong><\/p>\n\n\n\n

Let’s find out. <\/p>\n\n\n\n

<\/div>\n\n\n\n

Try and answer these 3 questions. <\/p>\n\n\n\n

<\/div>\n\n\n\n

Assume you have taken a home loan of Rs 50 lakhs<\/strong> at 8.50% interest<\/strong> for a tenure of 20 years<\/strong> with an EMI of Rs 43,391<\/strong>.<\/p>\n\n\n\n

Question 1<\/strong>: In the first 5 years you would have paid a total EMI of ~Rs 26 lakhs (read as more than 50% of your original loan amount). How much of your principal loan amount have you repaid?<\/strong><\/p>\n\n\n\n

Option A – 30% to 40%<\/p>\n\n\n\n

Option B – 20% to 30% <\/p>\n\n\n\n

Option C – less than 15%<\/p>\n\n\n\n

<\/div>\n\n\n\n

Question 2: For the 20 year home loan, how long does it take to repay 50% of the loan amount (principal)?<\/strong><\/p>\n\n\n\n

Option A – 10 years<\/p>\n\n\n\n

Option B – 12 years<\/p>\n\n\n\n

Option C – 14 years<\/p>\n\n\n\n

<\/div>\n\n\n\n

Question 3: For the loan of Rs 50 lakhs, what is the total EMI amount that you pay over 20 years? <\/strong><\/p>\n\n\n\n

Option A – Rs 70 lakhs to Rs 80 lakhs<\/p>\n\n\n\n

Option B – Rs 80 lakhs to Rs 90 lakhs <\/p>\n\n\n\n

Option C – more than Rs 1 cr <\/p>\n\n\n\n

<\/div>\n\n\n\n

Now let\u2019s check if you got them right!<\/p>\n\n\n\n

The correct answers are, <\/p>\n\n\n\n

Question 1: In the first 5 years you would have paid a total EMI of ~Rs 26 lakhs (read as more than 50% of your original loan amount). How much of your principal loan amount have you repaid?<\/p>\n\n\n\n

Correct Answer<\/strong> – Option C (less than 15%) – its actually 12%!!<\/span><\/strong><\/p>\n\n\n\n

<\/div>\n\n\n\n

Question 2:  For the 20 year home loan, how long does it take to repay 50% of the loan amount (principal)?<\/p>\n\n\n\n

Correct Answer<\/strong> – Option C (14 to 15 years)<\/span><\/strong><\/p>\n\n\n\n

<\/div>\n\n\n\n

Question 3: For Rs 50 lakhs home loan, what is the total EMI amount that you pay over 20 years? <\/strong><\/p>\n\n\n\n

Correct Answer<\/strong> – Option C (more than 1 cr) – its 1.04 crs<\/span><\/strong><\/p>\n\n\n\n

<\/div>\n\n\n\n

Surprised!<\/p>\n\n\n\n


Here is the evidence – the Detailed Home Loan EMI table<\/strong> which shows the 20 year journey <\/p>\n\n\n\n

\"\"<\/a><\/figure><\/div>\n\n\n\n

*You can refer to the annexure section of the blog to understand the various columns <\/p>\n\n\n\n

How does a home loan really work: 3 Surprising Insights!<\/span><\/strong><\/h3>\n\n\n\n

INSIGHT 1: During the initial years, most of your EMI goes only for interest payments!<\/span><\/strong><\/h4>\n\n\n\n

Sample this. <\/p>\n\n\n\n

For a Rs 50 lakhs home loan for 20 years at 8.5% interest rate\u2026<\/p>\n\n\n\n