(Transcribed by TurboScribe.ai. Go Unlimited to remove this message.) Welcome back.
In this module, we will discuss about the components of home loan EMI.
We have an understanding that if we take a 10 year loan and reduce it to 5 years, half the loan will be over.
We get that basic idea.
That is not right.
But if we take a 10 year loan and reduce it to 5 years, half the loan will be over.
In banking terms, they have added different types of components.
It is different from the calculation where the principal and interest are clear.
When you understand that, you will understand how a home loan works.
So, let us split the EMI.
What are the components in it?
According to the year, how much percentage of the loan will be over?
Let us get a clear understanding in this module.
Sir, firstly, what is there in home loan EMI?
What is there in home loan EMI?
How is it clear?
How is it calculated?
Please brief us on that.
Sure, Abhishek.
See, many people think of home loan EMI.
It is the monthly loan amount that we pay.
How do they calculate this?
Let us assume that 50,000 EMI is paid every month.
Let us assume that they have taken a loan of 50 lakhs.
Let us assume that the loan amount is 50 lakhs and the EMI is 48,000 or 50,000.
In the 50,000 EMI, how do the common people calculate?
25,000 will go to the principal and 25,000 to the interest.
That means, in 10 years, half the amount will be over.
This is how they calculate.
This is a big mistake.
Home loan does not work like this.
In the initial years, most of the money that we pay goes to interest.
Most of the money goes to interest.
This is where people need to understand.
For example, if we take a home loan of 50 lakhs,
we pay 56-57 lakhs in interest.
50 lakhs is the original amount.
Why do we pay so much interest?
In the initial years, most of the money that we pay goes to the interest component.
The amount that goes to the principal component is less.
Abhishek, let us look at an example.
Look at the screen.
Let us assume that a person has taken 50 lakhs in 9% interest rate.
Abhishek, in the initial years,
he pays a total of 5,39,836 rupees.
In this, the original amount is doubled.
The original amount is 93,636 rupees.
The interest rate is 4,46,200 rupees.
The remaining amount is 49,6364 rupees.
If we calculate the amount that ends in the first year,
it is 1.87%.
Abhishek, in the initial years,
he pays a total of 5,39,836 rupees.
In this, the original amount is 93,636 rupees.
The interest rate is 4,46,200 rupees.
What we need to understand here is,
in the initial years of the home loan payment,
most of the money goes to the interest component.
How much goes in the second year?
In the second year, if 5,39,836 rupees is paid,
4,37,416 rupees goes to the principal component.
1,02,419 rupees goes to the original amount.
The remaining amount is 48,3364 rupees.
If we calculate the amount that ends in the second year,
the original amount is 3.92%.
Let us see what happens in the third year.
In the third year, we pay 5,39,836 rupees.
4,27,890 rupees goes to the principal component.
1,12,027 rupees goes to the original amount.
The remaining amount is 46,919 rupees.
The amount that ends in the third year is only 6.16%.
Let us see what happens in the fourth year.
1,022,536 rupees goes to the principal component.
4,17,300 rupees goes to the principal component.
5,39,836 rupees is paid.
The remaining amount is 45,69,383 rupees.
If we calculate the amount that ends in the third year,
8.61% of the loan is paid.
I am saying this for the fourth year.
It has increased a lot.
There is the fifth year.
In the ninth year,
Why do we have to take the ninth year as an example?
If a lot of people have taken the loan for 20 years,
for the tenth year,
almost half of the loan would have ended.
This is the assumption.
In the ninth year,
5,39,836 rupees is paid to the principal component.
1,91,852 rupees goes to the principal component.
3,47,984 rupees goes to the principal component.
The remaining amount is 37,61,143 rupees.
Up to the ninth year also,
the amount that ends in the ninth year is 24.78%.
If we take the loan for 20 years,
after paying the EMI for the ninth year,
if we calculate the amount that ends in the eighth year,
only 25% of the loan would have ended.
Then the question arises,
how many years does it take to repay half of the loan?
If we take the loan for 20 years,
how many years does it take to repay 25 lakhs out of 50 lakhs?
If we calculate this,
in the 14th year,
5,39,836 rupees is paid to the principal component.
2,39,457 rupees goes to the principal component.
3,379 rupees goes to the principal component.
The total amount is 24,95,698 rupees.
The loan is 25 lakhs for the 14th year.
So, how much would have ended in the 18th year?
In the 18th year, 80% of the loan would have ended.
80.31%
If we calculate the EMI in the 18th year,
5,39,836 rupees is paid to the principal component.
4,29,964 rupees goes to the principal component.
1,09,872 rupees goes to the principal component.
80.31% of the loan would have ended.
9,84,714 rupees goes to the principal component in the 18th year.
If the loan is to be paid in the 20th year,
you would have paid 25 lakhs in the 20th year.
5,14,414 rupees goes to the principal component.
100% of the loan would have ended.
So, 50 lakh loan,
you have paid 58 lakhs or 57-58 lakhs.
You have paid 1 crore 8 lakhs.
So, if you use some tricks to pay the home loan,
you can easily pay the home loan without taking much risk.
You can reduce the burden of the home loan.
Let us see how this can be done in the future.
Definitely, sir.
So, now you know about the EMI components.
The important thing to understand is the period.
20 years, 15 years, long term loan.
Which one should be taken care of in these 20 years and 15 years?
What benefits do we get if we take care of either of these?
In the next module, we will see the results of the home loan.