5 Things You Need to Know about Home Loan Amortization Schedule

When you take a housing loan, it is vital to know all the details related to loan repayment. You should always be fully aware of the installment amount, principal and interest component, due date, interest rate, etc., to avoid discrepancies and repay the loan on time.

To help borrowers access these details, lenders provide an amortization schedule. The loan provider creates an amortization schedule for every borrower based on their loan amount, tenure, EMI, and interest rate. Here are some of the most important things you should know about the home loan amortization schedule -

The term ‘amortization’ translates to repaying a loan through fixed payments over a fixed tenure. The amortization schedule is basically a calendar with detailed information about how the loan will be repaid over a fixed tenure. One of the most critical functions of the amortization schedule is the bifurcation of the principal and interest components of loan EMIs.As you might know, the interest component in the EMI amount is the highest at the starting of the repayment cycle. With time, the interest component reduces, and the principal component increases. The amortization schedule helps you keep track of your loan repayments and enables you to know the total interest you’d be paying over the loan tenure.

The details included in an amortization schedule are as follows-

• Installment number
• Opening principal
• Installment amount
• Due date
• Principal component of EMI
• Interest component of EMI
• Closing principal
• Interest rate
• Total principal and interest paid by the borrower throughout the loan tenure

To give you an example of a home loan amortization schedule , let us assume that the home loan of Rs. 50 lakhs was taken for a tenure of 20 years at 7% p.a. The amortization schedule for the same would look like-

Borrowers can manually calculate the amortization schedule with the help of this formula-

A= P { [r(1+r)n] / [(1+r)n- 1] }

Here,A= periodic payment amountP= initial loan amount (principal)r= interest rate/12 months (expressed in decimal)n= total number of repaymentsBut as manual calculations can be time-consuming and prone to errors, a smarter alternative is to use an online amortization schedule calculator. Simple enter details like the loan amount, tenure, and interest rate, and the online tool will instantly provide the amortization schedule for the entire repayment tenure.

Most lenders generally provide the amortization schedule to the borrower at the starting of the repayment cycle. It is also sent to the borrowers online or offline at regular intervals throughout the loan tenure to help them track their repayments. Alternatively, if you’d like to view your current amortization schedule, you can request the same from your loan provider.Most top lenders also allow the customers to request and view their amortization schedule online by logging into their loan accounts. Note that there can be an additional fee for such requests. In case of any discrepancies in the schedule, you can always get in touch with your loan provider for clarifications.

It is also possible that a borrower might want to check the home loan amortization schedule even before applying for the loan. As you won’t know the EMI amount, you’ll not be able to use the online amortization calculator in such cases. A simple solution to this problem is using an online EMI calculator .You might at least know the loan amount you’d like to borrow, the approximate interest rate, and the tenure for which you’d like to take the loan. With these details, you can instantly calculate the EMI amount online. Once you know the EMI amount, you can use the amortization calculator to view the complete amortization schedule.