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Home Loan Amortization Calculator Lic Premium

Amortization Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

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1. What is Home Loan Amortization?

Home loan amortization is the process of paying off a mortgage loan over time through regular payments. Each payment covers both interest and principal, with the interest portion decreasing and principal portion increasing over the loan term.

2. How Does the Calculator Work?

The calculator uses the standard amortization formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

Explanation: The formula calculates the fixed monthly payment required to fully amortize a loan over its term, considering compound interest.

3. Importance of LIC Premium Consideration

Details: Many home loans in India are linked with LIC policies. Including the LIC premium in your monthly payment calculation gives a more accurate picture of your total monthly housing expense.

4. Using the Calculator

Tips: Enter the principal amount in INR, annual interest rate in percentage, loan term in years, and optional LIC premium amount. All financial values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why is my total payment much higher than the principal?
A: This represents the total cost of borrowing, including all interest payments over the loan term. The difference between total payment and principal is your total interest cost.

Q2: How does LIC premium affect my loan?
A: While LIC premium isn't part of the loan itself, it's often a mandatory monthly payment with home loans in India, increasing your total monthly outlay.

Q3: What's a good interest rate for home loans?
A: Rates vary, but generally anything below 8.5% is considered competitive in the current Indian market (as of 2023).

Q4: Should I prepay my home loan?
A: Prepayment can save significant interest if you have surplus funds, but consider tax benefits and alternative investment opportunities first.

Q5: How does loan term affect my payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms mean higher monthly payments but less total interest.

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