If you are planning on purchasing a house, then opting for a loan instead of splurging all your savings is a smart decision. However, a house loan is a long-term commitment. Therefore, in order to ensure smooth repayments, you must have a clear understanding of your payable dues. A home loan calculator can prove useful in this particular regard.
A home loan calculator is an online tool that allows you to calculate your house loan EMIs. Upon entering a few basic details, the calculator reveals the estimated EMI that you need to pay every month. In this article, we will share with you the things you must be aware of when using such a home loan calculator.
Things to Keep in Mind When Using a Home Loan Calculator
Formula to Calculate
A home loan EMI calculator works on a set mathematical formula that takes into account three factors, namely, the principal amount, housing loan interest rate, and loan tenor. Most lenders offer principal amounts up to Rs.5 Crore at affordable interest rates starting at 6.65% for up to a period of 20 years.
The formula that the calculator uses is as follows:
EMI = [P x R x (1 + R) N] / [(1+R) N – 1]
Here, ‘P’ denotes the principal amount borrowed;
‘R’ denotes the rate of interest charged by the lender;
and
‘N’ denotes the tenor of loan
Amortization Schedule
An amortization schedule for a house loan refers to a table of the monthly EMIs showing the break-up of your principal and interest in instalments starting from the beginning to the end of the chosen tenor. Although your EMIs remain fixed, the principal component goes up and the interest component comes down throughout the tenor. Thus, the whole payment schedule is transparent and easily available at the click of a button.
Part Prepayment Schedule
If you have substantial funds to pay your home loan EMI in advance, you can choose to make part prepayments. This helps reduce the outstanding loan amount, which in turn, lowers your net interest. All you need to do is specify if you would like to make a prepayment and your EMI will be calculated accordingly.
Home Loan Eligibility Criteria
When applying for home loan in India, make sure you are aware of the eligibility criteria set by the various lending institutions. Typically, the age limit for applying for a house loan is set between age 23 and 62. Besides, lenders also demand that the borrower resides and has a citizenship of India, earns a steady income, and a CIBIL score above 725. Meeting all of the home loan eligibility criteria mentioned above improves your chances of getting the desired amount.
How to Use a Home Loan EMI Calculator
Using an online home loan calculator is quite easy and straightforward. It only involves a few simple steps:
Step 1: Visit the ‘Home Loan EMI Calculator’ page on your lender’s website.
Step 2: Fill in the required details viz. principal amount, tenor, and housing loan interest rate.
Step 3: Click on the ‘Get an Estimate’ button to know your monthly EMIs.
Let’s say you have opted for a loan amount worth Rs.20 Lakh, then based on your chosen tenor and interest rate, your EMIs determined as per the formula will be as follows:
| Housing Loan Interest Rate | Tenor (10 years) | Tenor (15 years) | Tenor (20 years) |
| 8% | Rs.24,266 | Rs.19,113 | Rs.16,729 |
| 9% | Rs.25,335 | Rs.20,285 | Rs.17,995 |
| 10% | Rs.26,430 | Rs.21,492 | Rs.19,300 |
Benefits of Using a Home Loan Calculator
There are several perks of using this online tool. It helps you by:
- Displaying accurate results without having you to do the calculation all by yourself
- Providing you with an estimate in an instant, thus saving you time
- Letting you choose a loan tenor and principal that suit your budget
- Making the repayments easier in the long run
- Allowing you to compare between rates offered by other lenders
The best part is that the tool can be accessed anytime from anywhere.
A home loan calculator, thus, helps you make informed decisions. Since there’s no restriction on using the tool, one can try out different combinations multiple times until absolutely sure of and comfortable paying the displayed EMI. Get in touch with your lender and explore a wide range of options for a home loan in India before buying your dream house.
