A home loan is the major requirement for a person wanting to
purchase a house. This funds between 65% to 80% of the value of the house,
which is why it is important to plan your home loan extremely carefully. This
planning can be done in terms of:
·
Amount of home loan
·
Loan tenure
·
Rate of interest
A free tool available to use to plan all these is the home loan EMI
calculator. This is a calculator that uses the above mentioned three inputs
to find out the monthly installment amount that will have to be paid to the
lender. The home loan EMI is an amount that stays constant for the entire
duration of the loan. It consists of principal repayment and interest payment
on outstanding principal.
The housing loan EMI calculator uses a formula to find out
the installment amount. Some calculators ask for income and other details to
calculate the amount of loan a borrower is eligible for. This calculator can be
used for planning:
Amount of home loan: The higher the amount of home
loan you opt for, the higher is the amount you need to repay the lender. The
amount of your home loan also depends on other factors such as your monthly
income, outstanding loans, credit score, type of property etc. One way to
reduce the monthly installment is to opt for a higher down payment amount. This
will reduce the installment and the amount of loan you apply for.
Loan tenure: The loan tenure has an inverse
relationship to the monthly installment amount. Opting for a higher loan tenure
will mean a smaller installment amount. However this will mean the total
interest paid out for the duration of the loan is higher. On the other hand, if
you opt for a very small loan duration, the installment amount will be too high
which will put pressure on servicing. It is important to fix the right tenure
based on the installment amount that you can service based on your income and
monthly expenses. The installment amount can be calculated for different tenures
in the home loan EMI calculator. Be sure to read the lender’s guidelines on the
loan tenure they generally allow borrowers to fix. For standard home loan agreements,
the loan tenure is between 15 to 20 years. For smaller loans, the tenure may be
30 years but this depends from lender to lender.
Rate of interest: Choosing the right lender depends
on many different factors but one of the most important ones is the rate of
interest. The rate of interest determines the installment amount and also
determines the total cost of the house loan to the borrower. Different rates of
interest can be put in the house loan emi
calculator to find out the impact on the installments and the total interest
paid. Some calculators also allow calculating the EMI on a floating rate of
interest or a hybrid loan where the loan is serviced partly on a fixed rate and
partly on a floating rate of interest.
