Buying a house is something that most people wish to do. However, expensive real estate prices mean that most borrowers need to arrange financial assistance to make this dream come true. While home loans are a great way to gather the required funds, a borrower still needs to calculate the monthly instalments of the loan plan before applying for it. This is to avoid any kind of financial complications in the future. To pay off the loan without any repayment struggles, it is important for a borrower to know beforehand about their home loan EMIs. This will help in deciding whether to apply for the loan or look for a better loan plan.
Now, how does one calculate their home loan’s EMI payments? Earlier, the only way was to manually calculate home loan EMI payments. However, today, one can simply make use of a home loan EMI calculator to find out about a home loan’s monthly instalments.
To use a home loan EMI calculator, all that one needs to do is provide the tool with information on three components, which are:
- Home loan repayment tenure
Most lenders offer a period of 20 years to repay a home loan. Use the calculator to check out different tenures to find one that is most suitable.
- Principal loan amount
This refers to the amount that the borrower is looking to get. First, one should use a home loan eligibility calculator to find a loan amount that they can qualify for.
- Home loan interest rate
Different lenders can charge different interest rates. Use the calculator to understand whether the home loan rate is an affordable option.
Once the home loan EMI calculator has this information, it will display the loan’s EMI payments. Based on these results, a borrower can then decide whether to go apply for a home loan or look for a better option that suits their budget. Let’s look at an example to understand better:
Anil was looking to apply for a home loan of Rs 85 lakh at an interest rate of 7%. He planned to repay the loan in 15 years, and after using a home loan EMI calculator, he arrived at an EMI value of Rs 76,400. However, since his budget for home loan EMIs was set at Rs 70,000, he used the calculator to make changes in the repayment tenure to arrive at a suitable EMI value. By simply changing the tenure from 15 years to 20 years, Anil arrived at an EMI result of Rs 65,900, which was well under his budget.
The calculator also displays the total interest payment towards the loan, which in this case came to Rs 73,16,098. If Anil wants to save more on the total interest payment, he can use the calculator to understand the best tenure that keeps the EMI value under his budget as well as saves on interest.
The best part is that a home loan EMI calculator is available on most financial institutions’ websites and can be used by anyone for free.