With a rise in real estate market prices, buying a home is one of the biggest investments you may make in your life. Along with being a huge step, it is also a step that will not take a lot of time. However, it is an expensive buy. Usually, it may require you to get a home loan. After passing the eligibility criteria given by your lender and taking a home loan, you will have to pay interest and repay the principal amount in equated monthly instalments (EMI). Here is where the concept of home loan EMI calculators comes in.
With a home loan EMI calculator, you can know about the EMI amount payable before you take a home loan. This will help you understand the loan amount and the loan tenure that will be suitable as per your income. To get through the entire home loan process and home loan tenure hassle-free, you can calculate your EMIs before taking a home loan using a home loan EMI calculator.
What Factors Influence Your Home Loan EMI Payments?
Before using a home loan EMI calculator, here are a few factors to keep in mind while choosing a home loan of your choice:
Your Income: One of the most important factors determining the amount of a loan you will be able to obtain, depending on the EMI you will be able to pay, is your income. Lenders take into account your income and try to give a loan that has EMI payments of less than a certain percentage, usually 40% to 50%, of your monthly income. Lenders like to make sure that you have a portion of your monthly income set aside for other expenses and savings.
Type of Interest Rate: Home loans may come with attractive and low-interest rates, but you should still take a loan for the required amount only, not extra. Along with this, a floating or fixed interest rate will also determine your EMI payments. For example, a floating interest rate will have a low rate, causing low EMI payments in the beginning. However, later, with a rise in the rates based on the market situation, the EMI payments would increase.
Your Expenses: When you consider the EMI payment as a portion of your income, consider the day-to-day expenses that you have to incur. Furthermore, future expenses like a child’s education, marriage, or vacation should also be kept in mind. Some funds for emergencies should also be maintained. For future expenses, the rising inflation also has to be noted.
Home Loan EMI Calculators
A home loan EMI calculator is a calculator specially designed to calculate the home loan EMIs that you will have to pay. It follows a specified formula that requires you to enter certain inputs.
The home loan EMI calculators work on the formula given below:
EMI = P x R x (1 + R)^N / [(1 + R)^N-1], where,
- P denotes the principal amount, that is, the original loan amount granted to you by your lender
- R stands for the rate of interest applicable to your home loan
- N denotes loan tenure every month.
What Are The Perks Of Loan EMI Calculators?
A home loan EMI calculator comes with certain benefits. Given below are some of them:
- The process is very easy. You just have to enter a few details like the loan amount, rate of interest, and tenure.
- It will help you compare different lenders based on the EMI and other fees, like processing fees.
- You can cross-check the repayment schedule that your lender provides.
- It results in better loan management.
What Are the Benefits of Calculating EMIs Before Taking a Home Loan?
Here is how you can benefit from calculating EMIs before taking a home loan, using a house loan EMI calculator:
1. You Can Decide the Amount You Need to Borrow
If you calculate the EMI payments that you will have to pay, using a home loan EMI calculator, you can understand what loan amount fits your budget depending on your income.
2. You Can Make a Repayment Plan Well in Advance
After you are done deciding the amount that you can borrow as per your budget and the applicable interest rates, you can start to plan the tenure that will help you reach that EMI amount. Make a list of the fixed expenses that you have to incur, and then plan out the loan tenure that will help you reach stress and hassle-free EMI repayment.
3. You Can Plan Prepayment
If you know about your EMI payments using a home loan EMI calculator, you can make investments or save money accordingly so that your loan burden goes down.
4. Other Benefits
- You can check your affordability.
- You can compare different lenders and their interest rates to pick the best-suited one.
- You can decide more simply between a fixed and floating interest rate.
- Your home loan processing will be quicker as you can present the numbers to your lender, and they may just cross-verify.
The Bottom Line
As an individual, you do not have only one expense to look after. As your family grows, the need for more expenses also goes up, along with the need for a bigger house. These needs subtly call for a home loan. The most important thing that we should consider while taking a home loan is the repayment burden that falls on us. For this, you should use a home loan EMI calculator. These calculators are designed in a way that helps you get accurate answers, and the best part is that these online calculators are free as well.
So what are you waiting for? Calculate your home loan EMI in advance and apply for a home loan today at Piramal Finance. You can also visit our website to read more such blogs.