Home loans can make your dream of buying a new house a reality. They are long-term financial commitments that require strict adherence to the EMI schedule. Before availing of a home loan, it is essential to have a clear repayment plan. It will help you manage your future expenses and obligations, savings, and family needs. To get a clear picture of how long it will take to close the home loan, you should calculate your home loan EMI. It can be done manually or by using a Housing Loan EMI Calculator. Read on to know more.
Tips for Simple Calculation of Home Loan EMI:
Finalize the Required Home Loan Amount
EMIs are calculated based on the funds borrowed. Determining the amount of money needed is the initial step in planning the repayment schedule. Individuals with a solid financial profile and good credit score (above 700) can get a sizable loan. It is difficult to get a home loan for a low CIBIL score. Necessary actions should be taken to improve your CIBIL score.
Furthermore, the property’s value determines the home loan’s size. Generally, depending on your eligibility and the lender’s policy you can avail up to 90% of the property value as a home loan following the regulatory guidelines. The difference has to be arranged as a down payment.
Drafting your plan before approaching your lender will help you in negotiations to finalize the loan amount. You can use a housing loan eligibility calculator to determine the maximum home loan amount that can be availed. Various factors such as your monthly income, current monthly obligations, nature, and property value are considered for the computation of the home loan.
Choose the Correct Loan Tenure
After computing the loan amount, you should decide the period over which the loan shall be repaid. To select the right loan tenure, multiple factors such as your age at the time of borrowing, your financial profile, and your EMI to income ratio must be considered.
Loan repayment is expected to be completed by the time the borrower reaches retirement age or the age of 65 years. Younger applicants will be able to take longer repayment tenures. For an applicant nearing retirement, it is best to get a co-applicant. It will enhance their eligibility for a home loan.
Lending institutions require that the borrower’s cumulative EMIs is not more than 50% of their net monthly income. Therefore, already having a substantial debt obligation can impact your loan eligibility and amount sanctioned.
Get the Best Interest Rate
The interest rate at which the loan is borrowed determines the length of your repayment period. Grihashakti offers nominal interest rates, starting as low as 7.5% p.a., to both salaried and self-employed applicants. You can save a lot on your EMI outflow over the loan tenure by bagging reasonable lending rates.
The interest rate is higher for applicants whose CIBIL score is between 700-750. As a result, the overall purchasing cost of the property increases. By improving your CIBIL score, you can avail of home loans at competitive interest rates from lending institutions.
There are two types of home loan interest rates – fixed and floating. Under the fixed interest rate, your interest rate remains fixed irrespective of the changes in the market. In other words, your interest rate gets locked in for the entire tenure of your home loan, and there will be no changes in your EMI.
On the other hand, the interest rate is subject to revision each quarter under the floating interest rate. There can be changes in the base rate due to RBI’s policy per market changes. This, in turn, can cause a change in the home loan interest rate. Therefore, you should choose the interest rate depending on your suitability.
EMI Calculation Using a Housing Loan Emi Calculator
A housing loan EMI calculator helps you ascertain your home loan EMI and decide on the ideal loan tenure. By using this EMI calculator, you can make an informed decision. You can determine how interest rates and tenures can impact your EMIs. It enables you to explore various affordable repayment schedules to suit your needs. You can also know the breakup of the overall loan i.e; the principal and interest components that have to be repaid during the entire tenure of the home loan. It uses 3 basic inputs- loan tenure, loan amount, and rate of interest. The calculator also shows an amortization schedule with details of the year-wise repayment schedule for the full loan tenure.
Manual Calculation of Home Loan EMI:
Home loan EMI can be calculated using the mathematical formula mentioned below:
EMI = [P x R x (1+R) ^N]/[(1+R) ^N-1]
P = Principal amount or the Loan amount
R = Rate of Interest. The monthly rate of interest on your home loan should be used.
N = Number of months during the loan tenure.
Benefits of Using House Loan Emi Calculator
- A free and readily available online tool can be accessed from anywhere i.e., computer or mobile phone.
- Quick and easy home loan EMI calculation
- You can choose suitable loan tenure depending on your disposable income.
- Get accurate results with good speed and reliability
- You can calculate the total interest amount on your home loan
- Ascertain the EMI schedule
Using a home loan EMI calculator is indispensable to deciding the quantum of contribution towards the home down payment. It is a financial planning tool that ensures timely loan repayments. Before opting for a home loan, checking your home loan eligibility using a housing loan eligibility calculator is essential. It will help you select and plan your home loan as per your specifications.