What is Home Loan?

Home loan or housing loan is usually the money you borrow from a financial institution by mortgaging your property. The money borrowed is to be used to purchase or build that property as the case may be. 
 

How is the interest calculated for a home loan?

In a typical home loan case, the lending institution will always charge either a fixed interest throughout the term of the loan period or it could be floating rate of interest. 

What is better, fixed or floating rate of interest?

Floating rate of interest benefits you whenever the interest rates are lower. With a fixed EMI, the principal component paid off becomes higher whenever the interest rates fall. On the other hand, a fixe interest rate gives you predictability. You can benefit when the interest rates go high. 

But, usually the fixed interest rates are always slightly higher than the floating rates, as the financial institutions hedge against any future hike in the interest rates. 

You have to choose based on your future financial situation. Typically, a working professional grows financially and salaries also grow over time, so their ability to pay off loans improves. They prefer floating rates so that they are left with more cash in hand to pay off the other obligations during initial years of a property mortgage.
 

How does the interest calculation happen over years?

When you pay the EMI, the share of interest in the EMI is usually higher (more than 50%) as compared to principal. The institutions try to recover the interest component of the loan earlier to benefit from the overall mortgage scheme. Usually, the last 10 years out of a 20 year loan term will see a smaller component of interest and mostly it is the principal that is paid off.

How does this calculator work? Does it show floating rate or fixed rate of interest?

This calculator shows a fixed interest rate calculation over time to give you a general indication of the EMI you will pay and a break up between principle and interest payout. However, a floating rate calculation has to happen based on the interest rates declared by the institution every quarter. The calculator gives you an approximate idea of how much interest and EMI you will end up paying for a specific loan and tenure.