While a housing loan is a popular choice among borrowers, you should understand the implication of taking a home loan before applying. A home loan is a secured mortgage loan, so you can expect a repayment tenor that stretches up to 30 years, depending on your eligibility. Since a home loan is a secured loan, the interest is typically low. In fact, now might be the best time to get a home loan because the Reserve Bank of India’s recent rate for home loan interest is at an all-time low.
Once you have decided to take a home loan, it’s wise to develop a repayment strategy. One way to do this is by determining your equated monthly instalments (EMI).
This article will explore everything you need to know about a housing loan EMI calculator. Read on to learn more.
The Meaning of Home Loan EMI
A home loan EMI is the payment you make to close a home loan, and it comprises the principal amount and the interest. The principal represents the actual loan amount, while the interest is the amount that the lender charges you for taking the loan.
What is a Housing Loan EMI Calculator?
As you prepare to apply for a home loan, it’s essential to have an idea of what your EMIs will look like. The home loan EMI calculator is a vital tool designed to provide accurate information concerning your home loan repayment. Using this tool, you can prepare a logical home loan repayment plan that will enable you to repay your loan smoothly.
As you make monthly payments to service the loan, other expenses will also require your attention. Using the home loan calculator will help you greatly in terms of drawing up a reasonable repayment schedule and plan. To begin, simply input the desired loan amount, the interest rate, and tenor, and you’ll get your results displayed instantly.
The Housing Loan EMI Formula
To calculate the EMIs payable on your home loan, study this formula closely:
EMI= [P × R × (1+R)^N]/[(1+R)^N-1]
Below is a breakdown of the above formula:
E: Equated monthly instalment
P: Principal loan amount
R: Monthly interest rate (to derive the monthly interest rate, divide the monthly rate by 12.)
N: The number of monthly instalments in the tenor.
Note that you should not include the lender’s processing fees while calculating the home loan EMIs.
Why Should You Use the Housing Loan EMI Calculator?
Using an online home loan EMI calculator has several amazing benefits. Here are some of them.
Whenever you use the online home loan EMI calculator, you are assured of quick turnaround times. Simply input details like the loan amount, interest rate, and tenor. Within seconds, you will be able to access the results.
It Helps You to Compare Lenders
If you’re planning a balance transfer of your home loan and want a new lender with great terms, using the calculator is a great way to begin. Most applicants switch to new lenders whose rates are worse than the previous lender because they did not calculate the EMIs. Using this tool prevents you from making an unwise financial decision.
You Can Manage Your Home Loan
Let’s say you’re a salary earner that just got a raise. This means you have more money to channel towards servicing the home loan. However, in what way can this lessen the burden of repayment?
Evaluating the calculator’s results helps you to act smartly. For instance, making a prepayment will reduce the home loan balance greatly. Using a home loan EMI calculator helps you get the most out of such opportunities.
What Factors Affect the EMIs on a Home Loan?
Do you remember the formula? It’s composed of elements like tenor, principal amount, etc. Now, let’s find out how they can impact your EMI value.
As previously mentioned, this represents the amount a lender approves for disbursal. It is equal to the EMIs, so a high loan amount means that you’ll pay a high EMI and vice versa.
Home Loan Interest Rate
This refers to the amount charged for taking a loan. Lenders offer housing loan interest rate from 6.50% upward. If the EMI is high, so will the EMIs. To avoid taking a high-interest loan, we advise you to use the housing loan EMI calculator.
Loan Repayment Tenor
This represents the period within which the lender expects you to complete repaying a home loan. While a long tenor assures you of paying a lower principal amount, it means that you will pay more interest.
A home loan EMI calculator is valuable when applying for and repaying a home loan. You can find one on your lender’s website. It’s user-friendly and delivers precise results. Calculate your EMI today to prevent complications tomorrow.