Updated : January 2018 Several of our customers have faced problems understanding their amortization schedules. Some realize this while explaining their home loan plan to us. But it is actually very easy. So here is a little help in understanding your home loan repayment schedule better. Given below is an amortization schedule;
Let us begin with understanding each component of this schedule:
1. Installment number:
This column simply indicates the serial number of each EMI with the details of each payment given in the respective rows.
2. Due date:
This column indicates the date on which each loan payment is due. Generally EMI payments occur once a month, on the same day of each month, making it easier for borrowers to remember the payment dates.
3. Opening principle:
This column indicates the principal amount at the beginning of every month on which you are being charged the interest.
4. Installment amount:
Also known as EMI, this column indicates the monthly installment you are liable to pay to the bank as repayment. This amount changes with change in interest rate over a period of time.
5. Principle component of installment:
This column indicates that component of your EMI that has been spent on repayment of principal amount.
6. Interest component of installment:
This column indicates that component of your EMI that has been spent on paying off the interest levied on your opening principal amount. Initially, each payment you make pays off more of the interest component than the principal amount but as time goes by, the reverse becomes applicable.
7. Closing Principle:
This column indicates the remainder of principal after each month’s installment has been paid. The closing principal amount of each month will be equal to the opening principal amount of the next month.
8. Rate of interest p.a.:
This column indicates the rate of interest per annum (year) and may keep varying at the discretion of your bank. This rate determines the EMI that you are required to pay every month. In the table given above, we observe an increase in the rate of interest, this means that each EMI you pay will pay off more of the interest component than the Principal amount. A home loan is a very long term commitment. It is important to understand what impact interest rates have on your cash flow. If you have an existing home loan or if you are planning to take a home loan, click on the link below and calculate your savingsnow.
SwitchMe is a registered trademark of SwitchMe Technologies Private Limited. SwitchMe does not claim the right to use any logo/ trademark other than its own. SwitchMe does not represent any other company, bank, or organization in relation to its services.