A home loan is a significant financial commitment that spans decades; thus, borrowers are advised to undertake home loan planning before signing up for such a huge obligation. One of the best ways to plan the home loan journey is to use a home loan EMI calculator. However, here are a few things you must know about the ideal way to use the EMI calculator for a home loan.
Factors Affecting the Home Loan EMI
To make sure that the repayment option is in favor of your situation, it is important to ascertain the factors that are going to impact the number as well as the final amount of monthly installments. So, here’s a list of the factors to review to make your repayment affordable, easy, and smooth.
This is the home loan amount that you borrow from the lending institution as a home loan. It is directly proportional to EMIs, indicating higher the home loan principal amount, the higher will be the home loan EMIs and vice versa.
Home Loan Tenor
The time it takes to repay the home loan amount along with the home loan interest is termed the tenor or the loan period. It is indirectly proportional to home loan EMIs, which indicates that the lower the tenor, the higher will be the home loan EMIs and vice versa.
Home Loan Interest Rate
When you borrow the home loan amount, you are charged a certain amount on the borrowed sum. A home loan interest rate is directly proportional to home loan EMIs, meaning that the higher the interest rate, the higher will be the home loan EMIs and vice versa.
Home Loan Prepayments
Making prepayments on your loan helps you lower the amount owed on your loan. This, in turn, helps you reduce your EMIs.
It is referred to as the cost charged by lenders to process a loan application. This amount is typically either a percentage of your loan amount or the lender’s set minimum or maximum charge. The loan documents determine how much money you can get as a loan. Even if your application is denied, the fee is mandatory with many lenders. Besides, other key factors mentioned below play a huge role in deciding the home loan amount:
- Type of profession
- Income and age
- Number of dependants
- Income of co-applicants
- Assets, liabilities, stability, and continuity of the borrower’s occupation
Further, home loan eligibility is also based on the current value of property chosen by you.
If you want to use the home loan calculator to your best advantage, developing an understanding of these factors and how they affect your EMIs as well as your loan journey can be crucial.
Why Must You Use a Home Loan EMI Calculator
It Reflects Results in Seconds
Calculating housing loan EMIs manually is not a task that is simply prone to mistakes, but it also demands a significant amount of time and effort. If you start calculating your EMIs manually, you are sure to be busy for the next few hours. Instead, why not use an EMI calculator for error-free calculations? Any standard calculator housing loan will share results within seconds. Given the calculator’s speed, you can try several combinations to arrive at an EMI figure that suits you best.
It Lets You Plan Your Housing Loan Journey
One of the biggest advantages of a housing loan EMI calculator is that it helps you prepare for the home loan journey. Once you input the loan amount you want and the tenor, the calculator will show up your EMIs. Knowing the probable EMI outgo for the chosen amount will help understand whether you can afford the home loan amount you are seeking or not.
Other than calculating EMIs, the calculator also gives a breakup of the home loan value. It will tell you what percentage of the EMI is going to contribute to the home loan principal repayment, what percentage is going to contribute to the home loan interest repayment, and how this is going to change with the loan tenor. Use a home loan EMI calculator to ensure that you are only borrowing the amount you can afford.
It Helps Plan Repayments
If you want to close your loan as soon as possible, the way out is to make part-prepayments. If you have some extra funds during the home loan tenor, opt to make part prepayments to reduce the loan outstanding. Use a housing loan EMI calculator to understand how a part prepayment impacts the home loan tenor.
Simple Steps to Use a Housing Loan EMI Calculator
Though a calculator housing loan provides a detailed overview of the home loan repayment plan, this schedule will change if you keep making part-prepayments.
Borrowers must be aware of the fact that there isn’t any limit on the prepayment number. The part-prepayments you will make will go toward covering the outstanding housing loan amount. As part-prepayments reduce the home loan amount, the net payable home loan interest will reduce following the part prepayments.
The amount you pay eventually lowers the outstanding housing loan balance, lowering the net interest payable. If you are wondering which housing loan interest calculator you will use, you can use the one you see featured on the chosen home loan lender’s website.
To use a housing loan EMI calculator in the best way possible, use the following steps:
- Visit your lender’s website to access the housing loan EMI calculator.
- Insert the desired home loan amount, the home loan tenor that you think will suit you the best, and the rate of home loan interest you think you are going to be offered.
- Click ‘Calculate’ and the housing loan EMI calculator will display your EMI instantly, the total home loan interest payable throughout the home loan tenor, and the total payment you’ll be required to make to your lender.
Now that you know the best way to use the EMI calculator for a home loan, what are you waiting for? Plan your process of home loan to settle down in the house of your dreams.