The short answer
To compare home-finance options, look past the monthly EMI to present worth: every payment discounted to today at the return your money could earn elsewhere. The EMI on a reducing-balance loan is P × r × (1+r)^n ÷ ((1+r)^n − 1); a PKR 1.2 crore loan over 20 years at 6% is about PKR 85,972 a month.
What the decision engine compares
For up to three options — for example a government housing-finance scheme, a commercial bank loan and a developer instalment plan — it calculates:
- Monthly EMI using the standard reducing-balance formula, and whether it fits within your chosen share of income.
- Total interest paid over the life of the loan.
- Up-front cash — down payment plus processing fees.
- Present worth at your MARR (minimum acceptable rate of return). Lower is cheaper in real terms.
- Annual worth — the present worth spread evenly over the tenure, so a 3-year plan and a 20-year loan can be compared fairly.
Prepay or invest a windfall?
If you receive a lump sum part-way through the loan, you can clear part of it or invest the money. The rule is simple: prepaying earns you the loan’s interest rate, risk-free. Investing only wins if you can reliably earn more than that rate after tax. The tool shows the balance at that point, interest saved and months cut, against the gain if invested.
Before you apply
Banks check your income, existing loans and the property’s legal status. Our guide to buying a house on instalments in Islamabad covers what lenders and developers ask for.
How to use the home finance decision engine
- 1Enter the property price, your monthly income and the maximum share of income you want for the EMI.
- 2Set your MARR — what your money safely earns elsewhere.
- 3For each financing option, enter the down payment, tenure, interest rate and fees.
- 4Compare EMI, total interest, present worth and annual worth; the cheapest overall is highlighted.
- 5Optionally enter a windfall to see whether prepaying or investing it wins.
Frequently asked questions
+How is EMI calculated for a home loan in Pakistan?
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the loan, r the monthly rate (annual rate ÷ 12) and n the number of months.
+What is the EMI on a PKR 1 crore home loan?
It depends on the rate and tenure. Enter 1 crore as the loan amount (price minus down payment) with your bank’s rate and tenure in the calculator for the exact figure.
+Should I prepay my home loan or invest?
Prepaying returns the loan’s interest rate with no risk. Invest only if you can reliably earn more than that rate after tax.
+What share of income should go to a home loan EMI?
Banks commonly cap total EMIs at around 40–50% of income. Staying well below that leaves room for emergencies.
+What is present worth and why does it matter?
It converts every future payment into today’s money at your MARR, so options with different rates, fees and tenures can be compared on one number.