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(Transcribed by TurboScribe.ai. Go Unlimited to remove this message.) Welcome back.

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In this module, we will discuss about the components of home loan EMI.

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We have an understanding that if we take a 10 year loan and reduce it to 5 years, half the loan will be over.

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We get that basic idea.

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That is not right.

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But if we take a 10 year loan and reduce it to 5 years, half the loan will be over.

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In banking terms, they have added different types of components.

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It is different from the calculation where the principal and interest are clear.

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When you understand that, you will understand how a home loan works.

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So, let us split the EMI.

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What are the components in it?

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According to the year, how much percentage of the loan will be over?

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Let us get a clear understanding in this module.

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Sir, firstly, what is there in home loan EMI?

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What is there in home loan EMI?

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How is it clear?

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How is it calculated?

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Please brief us on that.

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Sure, Abhishek.

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See, many people think of home loan EMI.

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It is the monthly loan amount that we pay.

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How do they calculate this?

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Let us assume that 50,000 EMI is paid every month.

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Let us assume that they have taken a loan of 50 lakhs.

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Let us assume that the loan amount is 50 lakhs and the EMI is 48,000 or 50,000.

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In the 50,000 EMI, how do the common people calculate?

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25,000 will go to the principal and 25,000 to the interest.

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That means, in 10 years, half the amount will be over.

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This is how they calculate.

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This is a big mistake.

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Home loan does not work like this.

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In the initial years, most of the money that we pay goes to interest.

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Most of the money goes to interest.

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This is where people need to understand.

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For example, if we take a home loan of 50 lakhs,

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we pay 56-57 lakhs in interest.

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50 lakhs is the original amount.

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Why do we pay so much interest?

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In the initial years, most of the money that we pay goes to the interest component.

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The amount that goes to the principal component is less.

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Abhishek, let us look at an example.

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Look at the screen.

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Let us assume that a person has taken 50 lakhs in 9% interest rate.

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Abhishek, in the initial years,

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he pays a total of 5,39,836 rupees.

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In this, the original amount is doubled.

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The original amount is 93,636 rupees.

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The interest rate is 4,46,200 rupees.

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The remaining amount is 49,6364 rupees.

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If we calculate the amount that ends in the first year,

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it is 1.87%.

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Abhishek, in the initial years,

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he pays a total of 5,39,836 rupees.

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In this, the original amount is 93,636 rupees.

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The interest rate is 4,46,200 rupees.

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What we need to understand here is,

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in the initial years of the home loan payment,

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most of the money goes to the interest component.

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How much goes in the second year?

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In the second year, if 5,39,836 rupees is paid,

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4,37,416 rupees goes to the principal component.

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1,02,419 rupees goes to the original amount.

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The remaining amount is 48,3364 rupees.

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If we calculate the amount that ends in the second year,

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the original amount is 3.92%.

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Let us see what happens in the third year.

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In the third year, we pay 5,39,836 rupees.

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4,27,890 rupees goes to the principal component.

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1,12,027 rupees goes to the original amount.

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The remaining amount is 46,919 rupees.

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The amount that ends in the third year is only 6.16%.

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Let us see what happens in the fourth year.

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1,022,536 rupees goes to the principal component.

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4,17,300 rupees goes to the principal component.

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5,39,836 rupees is paid.

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The remaining amount is 45,69,383 rupees.

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If we calculate the amount that ends in the third year,

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8.61% of the loan is paid.

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I am saying this for the fourth year.

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It has increased a lot.

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There is the fifth year.

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In the ninth year,

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Why do we have to take the ninth year as an example?

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If a lot of people have taken the loan for 20 years,

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for the tenth year,

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almost half of the loan would have ended.

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This is the assumption.

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In the ninth year,

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5,39,836 rupees is paid to the principal component.

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1,91,852 rupees goes to the principal component.

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3,47,984 rupees goes to the principal component.

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The remaining amount is 37,61,143 rupees.

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Up to the ninth year also,

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the amount that ends in the ninth year is 24.78%.

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If we take the loan for 20 years,

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after paying the EMI for the ninth year,

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if we calculate the amount that ends in the eighth year,

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only 25% of the loan would have ended.

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Then the question arises,

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how many years does it take to repay half of the loan?

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If we take the loan for 20 years,

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how many years does it take to repay 25 lakhs out of 50 lakhs?

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If we calculate this,

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in the 14th year,

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5,39,836 rupees is paid to the principal component.

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2,39,457 rupees goes to the principal component.

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3,379 rupees goes to the principal component.

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The total amount is 24,95,698 rupees.

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The loan is 25 lakhs for the 14th year.

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So, how much would have ended in the 18th year?

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In the 18th year, 80% of the loan would have ended.

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80.31%

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If we calculate the EMI in the 18th year,

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5,39,836 rupees is paid to the principal component.

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4,29,964 rupees goes to the principal component.

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1,09,872 rupees goes to the principal component.

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80.31% of the loan would have ended.

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9,84,714 rupees goes to the principal component in the 18th year.

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If the loan is to be paid in the 20th year,

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you would have paid 25 lakhs in the 20th year.

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5,14,414 rupees goes to the principal component.

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100% of the loan would have ended.

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So, 50 lakh loan,

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you have paid 58 lakhs or 57-58 lakhs.

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You have paid 1 crore 8 lakhs.

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So, if you use some tricks to pay the home loan,

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you can easily pay the home loan without taking much risk.

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You can reduce the burden of the home loan.

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Let us see how this can be done in the future.

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Definitely, sir.

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So, now you know about the EMI components.

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The important thing to understand is the period.

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20 years, 15 years, long term loan.

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Which one should be taken care of in these 20 years and 15 years?

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What benefits do we get if we take care of either of these?

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In the next module, we will see the results of the home loan.