Basics3 min read · Updated 17 October 2026
How is home loan EMI calculated? The formula, with a worked example
The EMI formula in plain words, a step-by-step worked example in rupees, why early EMIs are mostly interest, and how rate and tenure change your EMI.
The formula
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1)
- P is the amount you borrowed (the principal).
- r is the monthly interest rate: the yearly rate ÷ 12 ÷ 100. A rate of 8.5% a year is 0.085 ÷ 12 = 0.0070833 a month.
- n is the number of monthly instalments: years × 12.
The formula finds the one fixed payment that, month after month, pays all the interest that builds up and also repays the principal by the last month.
A worked example
Loan: ₹30,00,000. Rate: 8.5%. Tenure: 15 years (n = 180).
- Monthly rate r = 8.5 ÷ 12 ÷ 100 = 0.0070833.
- Work out (1 + r)180 = 3.5627.
- EMI = ₹30,00,000 × 0.0070833 × 3.5627 ÷ (3.5627 − 1) = ₹29,542.
Total repaid = ₹29,542 × 180 = ₹53,17,594. Total interest = ₹23,17,594, which is more than 77% of the amount you borrowed. Try your own numbers in our EMI calculator.
Why early EMIs are mostly interest
Each month the lender charges interest on the balance you still owe, then the rest of the EMI reduces that balance.
- Month 1: interest = ₹30,00,000 × 0.0070833 = ₹21,250. Principal repaid = ₹29,542 − ₹21,250 = ₹8,292.
- As the balance falls, interest shrinks and more of each EMI goes to principal.
- After 7.5 years (halfway), you have paid about ₹26,58,797 but still owe about ₹19,61,039.
That is why prepaying early saves the most, and why transferring a loan late in its life saves little. See part prepayment.
What moves your EMI
| Change | EMI | Total interest |
|---|---|---|
| 8.5%, 15 years (base) | ₹29,542 | ₹23,17,594 |
| 9%, 15 years | ₹30,428 | ₹24,77,040 |
| 8.5%, 20 years | ₹26,035 | ₹32,48,327 |
| 8.5%, 10 years | ₹37,196 | ₹14,63,485 |
A longer tenure lowers the EMI but raises the total interest sharply. A shorter one does the opposite. A higher rate raises both.
Flat rate vs reducing rate
Some personal loans and vehicle loans quote a flat rate, where interest is charged on the full original amount for the whole term. A flat rate of 8% costs far more than an 8% reducing rate. Compare them in the flat vs reducing rate calculator. Home loans in India use the reducing balance method.
Why your lender's figure may differ slightly
Lenders may calculate interest daily, round differently, or start the first EMI after a few extra days of pre-EMI interest. The result can differ by a few rupees. For anything bigger, ask for the repayment schedule in your KFS.
Common questions
What is the formula for home loan EMI?
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of monthly instalments.
Why is so much of my EMI interest at the start?
Because interest is charged on the outstanding balance, which is highest at the start. As you repay principal, the interest part shrinks and the principal part grows.
How does tenure change EMI?
A longer tenure gives a lower EMI but costs more total interest. A shorter tenure raises the EMI and cuts total interest.
Is the EMI the same if the interest rate changes?
On a floating-rate loan the lender either changes the EMI or changes the tenure when the rate resets. See our post on the October 2026 repo rate hike.