A home loan is a secured loan that allows the borrower to obtain the funds needed to purchase their dream home. A home loan is one of the most popular methods of obtaining funds because of the advantageous lending terms that you receive because the government and lenders want to ensure that more of its citizens are proud homeowners, which is made possible by providing competitive home loan interest rates, long term tenors, and sizeable sanctions.
A home loan is a long-term, expensive financial obligation, and it is critical that you plan your finances accordingly before taking out a home loan. If you fail to make your monthly payments or are unable to repay the loan amount, the lender has a legal right to your property and may liquidate it to recover their losses.
There are several online tools available to help you plan your finances accordingly, and one of the most important tools you can use is an online home loan EMI calculator, which can help you understand your home loan affordability.
Here’s how to use an online mortgage EMI calculator:
Step 1: Go to the online home loan EMI calculator.
Step 2: Fill in the following information in the blank spaces provided:
- Enter the loan amount you require.
- Enter the tenor period with which you are most comfortable.
- Enter the interest rate that was offered to you.
Step 3: Once you’ve entered all of the necessary information, click the submit button.
Step 4: After entering the necessary information, the calculator will display the following results:
- The monthly payments you will make for the duration of the loan.
- The total amount of interest payable
- The total loan amount payable (inclusive of interest and principal amount)
These calculators operate on the basis of an algorithm, so you can be confident that you will receive error-free and accurate results every time. Additionally, because this tool is free, you are free to make as many changes as necessary to achieve the best possible results.
Most calculators will even show you your loan EMI schedule so you can plan your finances based on the information you’ve provided. This schedule will be displayed in a way that includes all of the information you require on a yearly basis.
Home Loan Amount = 6,00,000/-
Interest Rate = 8% per annum
Loan Tenor = 5 Years or 60 Months
Home Loan EMI = Rs. 12,166/-
Total Interest Payable = Rs. 1,29,950/-
Total Payable (Interest + Principal) = Rs. 7,29,950/-
|Year||Principal (A)||Interest (B)||Total Payment (A + B)||Balance Amount||Loan Paid up till Date|
What is EMI?
EMI stands for Equated Monthly Instalments and it is the amount of money you will be required to pay every month to the lender such as a bank or a Non-Banking Finance Company (NBFC) for the duration of the tenor till the entirety of the loan amount is paid off. Your EMI is made up of an interest and a principal component that is spread out over the term of your loan. The interest portion of the EMI will be much higher at the start and will gradually decrease over time, and you will be paying more towards the principal component over time.
Here is the formula for calculating your EMI:
EMI = P x R x (1 + R) N / ((1 + R) N – 1)
P stands for the principal amount
R stands for the Rate of Interest
N stands for the Tenor Period
What are the types of Interest Rates you can opt for?
When applying for a home loan, you can choose between three types of interest rates: Fixed Interest Rate, Floating Interest Rate, And Hybrid Interest Rate.
Fixed Interest Rate
The interest rate under this regime remains fixed for the duration of the loan, and market fluctuations have no effect on your interest rate. This interest rate is appropriate for applicants who have chosen a short-term loan.
Floating Interest Rate
Under this regime, the interest rate fluctuates based on current market trends, and your interest rate is linked to an external benchmark such as the repo rate. This could be a beneficial or costly ordeal because your interest could rise or fall based on market fluctuations. A floating interest rate is appropriate for applicants who have chosen a loan with a long-term tenor.
Hybrid Interest Rate
A hybrid interest rate combines fixed and floating interest rates, and your interest rate will be fixed for the first period of the loan before switching to a floating interest rate. For example, if you choose a loan with a tenor of ten years, the first three years will have a fixed interest rate and the remaining seven years will have a floating interest rate.
What is a home loan eligibility calculator?
A lender will consider your monthly income, loan repayment term, other sources of income, existing debt, monthly obligations, age, and city of residence, among other things, when you apply for a home loan. You can use a home loan eligibility calculator to better understand your home loan eligibility criteria. Here’s how you can make use of one:
Step 1: Enter your residence city
Step 2: Enter your date of birth
Step 3: Enter your monthly income
Step 4: Input your current Monthly Obligations.
Step 5: Click submit to see the loan amount you are qualified for.