A home-loan EMI stays the same each month, but what it pays for changes slowly over the tenure. On an illustrative loan of ₹30,00,000 at an interest rate of 9% for 20 years, the EMI is ₹26,992, and ₹22,500 of the first EMI is interest. Only ₹4,492 reduces what you owe. Watching just this month's debit hides that, which is why a loan is worth tracking for its full tenure.
This post explains how amortisation works, walks through the first three months of that loan with the arithmetic shown, and lists what a full-tenure EMI tracker should show you.
What is amortisation?
Amortisation is the way a loan is paid down in equal EMIs. Each EMI has two parts:
- Interest for the month, charged on the amount still owed.
- Principal, which is whatever is left of the EMI after the interest.
Because interest is charged on the amount still owed, it is largest at the start, when you owe the most. As that amount falls, the interest part shrinks and the principal part grows, even though the EMI stays the same. Near the end of the loan the split reverses, and most of each EMI goes to principal.
How is the EMI calculated?
The standard formula is:
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)
where P is the loan amount, r is the monthly interest rate, and n is the number of EMIs.
For our illustrative loan:
- P = ₹30,00,000.
- The yearly rate is 9%, so the monthly rate r = 9% ÷ 12 = 0.75%, or 0.0075.
- The tenure is 20 years, so n = 20 × 12 = 240 months.
Putting these into the formula gives an EMI of ₹26,991.78, which rounds to ₹26,992 a month. Banks round in slightly different ways, and the last EMI is usually adjusted so the amount owed ends at exactly zero.
What do the first three months look like?
Each month, interest is the amount owed at the start × 0.75%. Principal is the EMI minus that interest. The new amount owed is the old one minus the principal.
| Month | Owed at start | Interest (0.75%) | Principal | Outstanding after EMI |
|---|---|---|---|---|
| 1 | ₹30,00,000 | ₹22,500 | ₹4,492 | ₹29,95,508 |
| 2 | ₹29,95,508 | ₹22,466 | ₹4,526 | ₹29,90,982 |
| 3 | ₹29,90,982 | ₹22,432 | ₹4,560 | ₹29,86,422 |
The arithmetic, line by line
Month 1: ₹30,00,000 × 0.0075 = ₹22,500 of interest. ₹26,992 − ₹22,500 = ₹4,492 of principal. ₹30,00,000 − ₹4,492 = ₹29,95,508 outstanding.
Month 2: ₹29,95,508 × 0.0075 = ₹22,466.31, which rounds to ₹22,466. ₹26,992 − ₹22,466 = ₹4,526 of principal. ₹29,95,508 − ₹4,526 = ₹29,90,982 outstanding.
Month 3: ₹29,90,982 × 0.0075 = ₹22,432.37, which rounds to ₹22,432. ₹26,992 − ₹22,432 = ₹4,560 of principal. ₹29,90,982 − ₹4,560 = ₹29,86,422 outstanding.
After three EMIs, a total of ₹80,976 has left the bank. The amount owed has fallen by only ₹13,578.
What happens over the first year and the whole loan?
Carry the same calculation through twelve months and the first year's EMIs add up to about ₹3.24 lakh. Of that, about ₹2.68 lakh is interest and about ₹56,000 is principal. After a full year of EMIs, the amount owed is still about ₹29.44 lakh.
Over all 240 months, the EMIs add up to about ₹64.78 lakh. Take away the ₹30 lakh borrowed and the total interest is about ₹34.78 lakh, more than the loan itself. Every figure here is for the illustrative loan and assumes the rate stays at 9% for the whole tenure, which floating-rate loans rarely do.
Why is this month's EMI the wrong thing to watch?
A bank app or a bank statement shows the debit. It shows that ₹26,992 left the bank on the 5th. It rarely shows, on the same screen, what that month did to the loan. Several questions need the full schedule to answer:
How much do we still owe?
The amount still owed is the number that matters for a prepayment, a sale of the house, moving the loan to another lender or a family's net worth. It is not the EMI multiplied by the months left, because that figure includes future interest. See family net worth for two people for how loans fit into the household total.
What does a rate change do?
With a floating-rate loan, a change in the rate changes the interest part of every remaining EMI. The bank may keep the EMI the same and stretch the tenure, or keep the tenure and change the EMI. Either way, the schedule you had last year is now wrong. A tracker that holds the full tenure can show the new end date or the new EMI, and how much more or less interest is left.
What does a prepayment do?
A part prepayment reduces the outstanding principal directly. Because early EMIs are mostly interest, a prepayment in the early years removes principal that would otherwise have carried interest for many years. The schedule shows the before and after. Whether to prepay is your decision. The schedule only shows the arithmetic.
When does the loan actually end?
The last EMI date matters for planning. It is when a large monthly outflow stops, and that changes the family's runway and its other plans. See emergency runway in months for why EMIs count as outflows you must keep paying.
What should a full-tenure EMI tracker show?
A good tracker for a home loan keeps the loan, not just the debit. It should show:
- The loan amount, rate, tenure, EMI and start date, entered once.
- The EMI date each month, with a notification before the debit.
- The amount still owed today, and how it will fall over time.
- The interest and principal split for any month.
- The total interest still to pay.
- The effect of a rate change or a prepayment, before you make it.
- The last EMI date.
For a family, it also needs to be shared. In many households one person's bank pays the EMI and the other person manages the funds that might go towards a prepayment. Both need to see the same numbers. If an SWP pays the EMI, the two dates need to line up, which we cover in timing an SWP before an EMI.
How Kosh helps
In Kosh you add a home loan once with its EMI schedule, and every Member with notifications on gets a notification on the due date. Anyone ticks the EMI done and the other phone shows it. The Family tab adds up every Member's loans next to funds, PPF and NPS, and What-if lets you try a change, such as a different EMI, before you make it. Hard rules warn you before a change breaks a limit you have set. Kosh tracks and warns; you decide.
Kosh is in private testing on iPhone and free during testing. Find out more at ourkosh.com.