What is a Mortgage?
A mortgage is a type of loan specifically used to purchase real estate — a home, apartment, or plot of land. The property itself serves as collateral, which means the lender can take possession of it if the borrower fails to repay. Mortgages are typically long-term loans with tenures ranging from 15 to 30 years, and repayment is made through fixed monthly instalments known as EMIs.
In India, mortgages are offered by banks (SBI, HDFC, ICICI, PNB) and housing finance companies (HFCs). The loan amount depends on the property value, your income, credit score, and the lender's policies. Interest rates can be fixed or floating, and the loan is structured using a reducing-balance method where each EMI covers both interest and principal.
How this mortgage calculator helps you
Buying a home is one of the biggest financial decisions you will ever make. This mortgage calculator helps you in the following ways:
Mortgage EMI formula
The EMI for a mortgage is calculated using the standard reducing-balance formula used by all lenders in India:
EMI = [P x R x (1+R)^N] / [(1+R)^N - 1]
Where P is the loan amount (home price minus down payment), R is the monthly interest rate (annual rate divided by 12 divided by 100), and N is the number of monthly instalments (loan term in months).
Factors affecting your mortgage payment
Several factors influence the monthly payment on a mortgage:
Home price
The purchase price of the property is the starting point. A higher home price means a larger loan amount, which directly increases your monthly payment. Consider whether the neighbourhood and size justify the cost.
Down payment
The more you put down upfront, the less you need to borrow. A down payment of 20% or more not only reduces your EMI but may also help you avoid additional costs like private mortgage insurance or higher interest rates.
Interest rate
Mortgage interest rates in India typically range from 8% to 10% depending on the lender and your credit profile. Even a 0.25% difference can add up to lakhs in additional interest over a 20-year term.
Loan term
Choosing a 30-year term instead of a 15-year term significantly lowers your monthly EMI but more than doubles the total interest paid. Use the amortization table above to compare scenarios before deciding.