For many of us, having a home remains one of our most treasured desires. Although it’s pretty simple to get a home loan these days, most potential homebuyers need help with how they’ll manage the repayment.
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Defining Home Loan
Home loans are secured loans obtained through the pledge of an asset as collateral. An affordable home loan interest rate and a lengthy loan term make home loans attractive for people seeking high-value financing. Equated Monthly Instalment (EMIs) are used to pay them back. Home loans enable you to possess the key to your dream house.
Why should you go with the EMI option?
The acronym EMI stands for Equated Monthly Instalment. Eligible monthly payments include principal and interest on a loan the borrower pays to the lender. The principal loan due amount decreases during the loan’s course once each EMI is paid. Property loan emi calculator, i.e., loan against property, can also be approved.
Decoding the jargon in EMI calculations:
If you consider taking up a home loan, the factors below will influence the EMI calculation.
- Pay a certain amount of Down payment: Before applying for a loan from a bank, once you’ve decided on a home, you must first arrange a specific amount from your resources. The down payment, typically 20% of the home’s worth, is what it is known. Additionally, you have the choice of paying more upfront.
- Principal amount: Most lenders will grant you about 80% of the house’s value since you’ve previously paid the 20% balance as a down payment. The loan approved in your name will be the basis for calculating the EMI. Over the loan, the principal and interest must be repaid to the bank in monthly EMIs.
- Interest Rate of the Home Loan: A crucial aspect in calculating your EMI is the interest rate on your home loan. The EMI will be reduced the lower the interest rate on the house loan. The actual rate may change based on your profession, gender, income, credit history, loan amount, and loan term, among other variables.
- Tenure of the home loan: Home loans can be extended for up to 20 years or even longer. While choosing a longer term will keep your EMI low, your overall home interest rates expense will be hefty. So, consider a period that will allow you to pay off debt comfortably while keeping your interest costs in check.
The loan amount, tenure, and interest rate are the variables that can cause an EMI to increase or decrease. A longer duration will result in cheaper EMIs. In contrast, a shorter tenure will mean you pay significantly higher EMIs for the same loan amount and interest rate.
Let us hop in to learn about the various methods of calculating the home loan EMI
Utilising variables like P – principal loan amount, R – the rate of interest on the home loan, and N – Tenure, you can use one of the following ways to calculate the home loan EMI.
Calculate Home Loan EMI using Standard Formula
The house loan EMI can be calculated using the standard method if you are proficient in math.
The formula: (P*R*(1+R)^N)/(1+R)^N -1)
P – principal loan amount,
R – the rate of interest on the home loan
N – tenure
The three variables, P, R, and N, help you calculate the EMI.
EMI calculation using Excel
Spreadsheets like Excel may also be used to compute home loan EMI, and the monthly payments can be customised for each individual. The principal loan amount, home loan interest rate, and tenure are also required in this situation.
Using of a home loan EMI calculator
The most straightforward and user-friendly approach to determining your EMIs is with a house loan EMI calculator. The three variables P, R, and N, which are the loan amount, home loan interest rate, and home loan tenure, must be used the most while utilising the housing loan EMI calculator.
Wrap up
To avoid the financial burden, prepare your home loan EMIs. Your loan term will go more smoothly if you select the bank with the lowest interest rate and other advantages and privileges. Analyse and calculate your EMI values, examine them in light of your financial situation, carefully compare them, and then decide.
