Before you avail of a home loan, it is vital to have a clear idea of the EMIs you are liable to pay. Whether you avail the loan at fixed or floating interest rates, you need to plan your current and future finances such that you do not miss even a single EMI payment.
A home loan calculator helps you do precisely that. It is a simplistic online tool that helps you determine your loan EMIs in a matter of seconds. It eliminates the need for manual computation, which is a tedious and time-consuming procedure while guaranteeing accuracy.
Factors affecting the Home Loan EMI
Income: An applicant’s monthly income is one of the most crucial factors. Lenders usually permit a home loan such that the EMI is less than 40% of his/her income, and a minimum of 15% is kept aside as savings. In this manner, the applicant would be left with a decent amount of expenditure.
Expenses: Another essential aspect is the expenses. You need to compute present along with predictable future expenses. For future planning, medical emergencies, children’s education, and other significant expenditure must be kept in mind. Hence, make sure that you would have a stable financial condition in order to provide for such instances in the future, along with paying the EMIs.
Rate of interest: Home loan interest rates are of two types - floating and fixed. In case you choose floating rates, the percentage will keep varying under several circumstances. However, if you choose a fixed rate, it would remain unchanged throughout the tenor.
Apart from the lender, you must be aware of home loan eligibility criteria to ensure that your loan gets sanctioned for the first time itself.
How does an EMI Calculator work?
A home loan EMI calculator works on the following formula:
- E = P x r x (1 + r) ^ n / ((1 + r) ^ n – 1)
- E stands for the EMI or monthly instalments.
- P is the amount you want to borrow as a loan.
- r denotes the rate of interest applicable every month.
- n represents the tenor, which should be inserted in months.
This formula can also be used to calculate EMIs manually. However, using an EMI calculator would help you obtain accurate results, which is a must before filling out the housing loan application online.
Benefits of using a Home EMI Calculator
You can enjoy several benefits of calculating EMIs before taking a home loan with EMI calculators:
The primary reason for calculating your EMI is to ensure that you would be able to repay the loan with the stipulated time frame.
You can calculate EMIs charged by various financial institutions or lenders and choose the best deal.
With the help of calculations, you can select the desired amount as well as tenor such that you could pay the loan without any fail.
If you prepare beforehand, it can be presumed that you won’t face any trouble while repaying the loan. Thus, your credit history would be much better.
In other words, the EMI calculator would help you manage your financial decisions in a more sorted and efficient manner. There are several online EMI calculators available, which you can make use of.
Some calculators also show your housing loan amortization schedule. The amortization table displays the breakup of your loan EMIs (according to principal and interest) as per months and years. Using this schedule helps you determine when to part-prepay or foreclose your loan.
