Home loans are a feature-rich credit product with a thirty years repayment period. You can purchase or construct a house now and repay it conveniently over 30 years.
The internet has made everything easy. You can use it to buy everything you need, including a house. Nowadays, many property websites list entirely constructed or under-construction houses you can buy. Alternatively, you may scan such websites to find a plot of land and build your dream house on it.
However, since the house purchase or construction cost might be pretty high, homebuyers rely on home (housing) loans to get the funds. A home or housing loan EMI calculator provides you with an estimate of the amount (principal+interest) you must pay every month to retain the possession of your house.
Read on to know the top-5 merits of using an EMI calculator before applying for a home loan and the best way to use it.
Housing Loan EMI Calculator – An Intro
Before applying for a home loan, it is wise to use an EMI calculator. Indian lenders provide EMI calculators for free. You can visit the lender’s website and open the EMI calculator to check your monthly liability.
While some lenders ask for your personal details like name, phone number, and email address, others do not require such information.
The EMI amount displayed by a housing loan EMI calculator has two components – principal and interest. During the loan tenure’s first few years, the borrower repays the interest more, while the weightage of the principal is more during the later years.
The chart displaying the detailed division of the principal and interest is known as the home loan amortization schedule.
Housing Loan EMI Calculator – Top 5 Benefits
Here are the significant benefits of using a housing loan EMI calculator:
Accurate Results
Since home loan EMI calculation determines your monthly liability, there must be no room for errors. Fortunately, a housing loan EMI calculator calculates EMI without mistakes.
So, you can use the figure to analyze your repayment capability before applying for a home loan.
Instant Estimate
Gone are the days when homebuyers wasted hours to get an estimate of the home loan EMI. Thanks to the online EMI calculator, you can do it instantly. It takes a few seconds to get the EMI figure you need.
Better Money Management
Applying for a home loan proper planning is crucial because Since a home loan is a collateral-backed loan, non-payment of dues may result in property liquidation and credit score degradation.
An EMI calculator makes money management easy. Once you know the amount you have to pay every month, you can adjust your finances accordingly.
Convenient Comparison
You can use an EMI calculator to check the real difference between interest rates offered by various lenders. Even a 0.10% difference in the interest rate can help you save a considerable amount on a 30-year home loan.
Free to Use
Online housing loan EMI calculators are always free to use, so you can use them as many times as you want and whenever the need arises. You can also apply for the loan soon after getting the estimate.
Housing Loan EMI Calculator – How To Use It
Depending on the type of calculator available on the lender’s website, you can input figures or use the slider provided to adjust the values. You can change the values easily, and the calculator will compute them and instantly give you accurate EMI amounts.
The formula used to calculate home loan EMI is as follows:
P x R x (1+R)^N / [(1+R)^N-1]
P – Principal loan amount
N – Loan tenure in months
R – Monthly interest rate
Principal
The principal or loan amount refers to the amount you need for house construction or purchase.
For instance, if the house construction/ purchase value is INR 50 lakh, the principal will be 50 lakh. However, the actual loan amount will be lesser since you must make a 10% down payment.
Interest Rate
The interest rate determines your liability arising from a home loan. The effective rate depends on your monthly income, debt profile, repayment capability, and property status.
Tenure
The tenure can be a minimum of five (5) years and a maximum of thirty (30) years. A shorter tenure increases the EMI amount, whereas an extended tenure does the opposite.
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Conclusion
Use an EMI calculator when applying for a home loan to fulfill your housing dream quickly. The best time to apply for a home loan is now since the interest rates are much lower than their normal levels.
