If you are planning to take a home loan, chances are you are researching various home loan options that best suits your budget and other requirements. Not only does a home helps you to own a home with a convenient repayment facility, but it also serves tax benefits associated with home loans.
If you are planning to take a housing loan, the foremost thing you must do is to check your desired loan amount’s affordability by calculating your monthly EMI. By calculating this, you will have answers to questions such as – will you be able to afford the loan and the EMI that will come with it? Will you have to compromise on your necessities to successfully repay EMIs over the tenor? Once you have the answers to these questions, you’ll have a better sense of what home loan plan will suit you best.
Home loans are repaid in the form of EMIs, which includes a principal component and an interest component.
The lender will also give you an amortization schedule which will tell you what percentage of each monthly EMI will contribute the principal repayment and what percentage will go towardsthe interest repayment. The amortization schedule will also give you your corresponding balance at the end of each month.
Let us look at the three components that you will input into the home loan EMI calculator.
When you apply for a housing loan, the lender funds only a certain percentage of the overall cost of the home. For instance, if you have your eyes on a home that is worth Rs.1 Crore, the lender will sanction only 70% to 90%* of the whole value. You will have to arrange the remaining amount.
When you are calculating home loan EMIs, you are required to input only the money borrowed and not the overall cost of the home. In this case, if the lender gives you Rs.75 lakh as a home loan, the principal amount will be Rs.75 lakh.
So, do you key in the lowest interest rate offered by a lender when calculating your EMIs? The interest rate that the lender will offer youis subject to your credit score, income profile, age, and other things. Thus, while calculating EMIs, use the lowest rate of interest only if you have a confirmation from the lender or input a slightly higher interest rate.
Bajaj Housing Finance, a wholly owned subsidiary of Bajaj Finance Limited, offers home loans at interest rates starting as low as 6.65%* p.a for salaried and professionals.
Lenders usually allow individuals to repay their home loan over a tenor up to 10 to 30 years. Bajaj Housing Finance allows borrowers to repay their loan over a tenor up to 30 years. So, if you are planning to calculate your EMIs either manually or with the help of an online Home Loan EMI Calculator, we recommend that you first decide the tenor that you will be opting for.
Just because we know the formula to calculate EMIs does not mean it is a good idea to sit down with pen and paper and calculate them manually. The EMI calculation formula is a tricky thing to do, and therefore, manual calculations are prone to errors. Further, creating your amortization schedule manually will take longer. Therefore, one must use online financial tools, such as a home loan EMI calculator, to understand their monthly EMI obligation and amortisation schedule.
Here are the benefits associated with using a home loan EMI calculator.
A home loan is a huge financial commitment. If you are planning to take a loan to buy a home, you should do all the planning in advance. This includes knowing your monthly EMIs and making sure you can afford them.
Disclaimer: This content is distributed by Bajaj Finance Ltd. No TNIE Group journalist is involved in the creation of this content.