Buying your dream home is easily financed with the help of a Home Loan.. Once you select the lender and match their Home Loan eligibility criteria. Then, comes the question of the amount of EMI you will have to pay taking into consideration the interest rate and housing loan tenure.
A Home Loan EMI calculator is an online tool that can help quantify your EMI. Read on to find out why you should get your EMI calculations done before applying for a Home Loan.
When you’re looking to buying a home, the obvious financing route you look for is a House Loan. With a choice of lenders offering Home Loans, it’s up to you to research and compare Home Loan interest rates and then decide on the lender. The interest rate is what primarily determines your EMI.
What is EMI? How to Calculate?
EMI or Equated Monthly Instalment on your Home Loan is the amount that you pay the lender each month towards your Housing Loan repayment. Comprising of both principal as well as interest, it is essential that you calculate your EMI before you apply to a House Loan lender. The interest that you need to repay through the EMI can be found using a Housing Loan interest calculator.
The first step towards applying for a Home Loan is to make use of a Home Loan Eligibility Calculator and determine how much Home Loan you can avail. Your eligibility is based on factors like your income, your age, occupation, and any outstanding liabilities. In most cases, you can get a Home Loan to the extent of 80-85% the value of the property.
After determining the eligibility, interest rate and tenor, you need to find out what’s your Housing Loan EMI is by making use of an online Home Loan calculator. Using these online calculators gives you the options of calculating EMI at varying interest rates and tenors. Depending on how much EMI you can afford to pay, you can fix the Home Loan tenor.
The EMI that you have to shell out has a deep impact on your finances. Hence, it’s necessary to determine the EMI before you sign on the dotted line.
Benefits of Calculating EMI Beforehand
● Reset your Financial Goals
A Home Loan is a long term liability, spreading anywhere between 15 to 20 years. You would be paying a chunk as interest. A shorter loan term has a high EMI, while a longer loan term has a comparatively low EMI. Depending on what are your financial goals, you can plan to have a short or long term Home Loan. Knowing the EMI due on the Home Loan will help you set realistic financial goals.
● Monthly Budget Planning
The EMI outflow is due every month till the time you repay the Home Loan in full. In addition to estimating and providing for your usual household expenses, bill and credit card payments, you also need to estimate what will be your liability towards the Home Loan repayment. This is where knowing the EMI will help to plan your budget and allocate funds towards repaying the Home Loan instalments.
● Maintaining your Credit Score
Your credit score is very vital to help you secure any type of loan and at favourable interest terms. If you take a huge Home Loan with a high EMI, there is every chance of default. These defaults can adversely impact your credit worthiness and pull down your credit score. On the other hand, if you know the EMI, you’ll make provisions to make the EMI payments on the due date, thus helping to build and maintain your credit score.
While the lender may grant you grace period in case of non-payment of EMI due to any emergency, repeated defaults on EMI can even lead to hypothecation. There is the risk of losing your asset. So, it is best that you take a Home Loan only if you can make the EMI payments on time.
While taking the Home Loan is the first major step, crystallising the EMI amount is also important. Online Housing Loan EMI calculators have made it east to calculate EMI on a Housing Loan in a jiffy. You can also find out the revised EMI, if you have prepaid your Home Loan.