Currently, due to high property rates, it is next to impossible to buy a home without taking help from any financial institution. You might need a home loan to further settle down in your life. The amount taken as a loan has to be repaid to the borrower.
A home loan is a very convenient way to raise debt and purchase a new property. The amount of loan is sanctioned as per the fair valuation of the property. Generally, 70%-to-80% of the property’s market value is sanctioned as a loan.
Now, when an individual decides to go for debt financing to buy an asset, it is considered as a better way to raise funds. However, large transactions make it difficult for them to make their monthly budget. Therefore, you can use this tool called; a housing loan calculator to make your monthly budget.
A housing loan calculator is a tool that overcomes the difficulty of calculating housing loan EMI. Since loan amounts are huge, therefore, the calculations are also complicated. Thus, to overcome this, lending institutions provide this tool on their website for free.
A housing loan calculator has multiple benefits however, the biggest one is that it can help you in budgeting your finances. You will be aware of the exact EMI payment amount that you need to pay to the lender.
Let us discuss how, as a borrower, you can benefit from a housing loan calculator.
Benefits Of Housing Loan Calculator
- The housing loan EMI calculator instantly generates results and displays them on the screen. The entire process is completed within a fraction of seconds.
- The EMI calculator for home loans is the easiest tool. You just have input values into the desired field and it will automatically generate the output.
- There are various combinations that you can choose from on the home loan calculator. You can decide the best suitable combination as per your budget.
- It is available 24/7 and 365 days on the website. Borrowers can use the calculator any time without paying anything.
- Before getting the loan amount sanctioned in your account, you can plan your monthly budget, as it will inform you about the total EMI amount that has to be paid, along with the total interest amount.
These are the reasons why you should use a housing loan calculator while applying for home loan.
Factors That Affect The Calculation
To calculate the EMI amount for any loan, you need these three variables: Principal Amount, Tenure, and the Rate Of Borrowing (Interest Rate). The formula used to code the housing loan calculator is:
EMI = [P*R*(1+R)^N]/[(1+R)^N-1]
Where; P is for Principal Amount, R is the Interest rate, and N is the Loan Tenure.
- Principal Amount:
The amount that is credited into the loan account of the borrower, is called the principal amount. Also, the principal or the sanctioned amount depends upon the current market value of the property.
There is a fixed time, decided mutually between the lender and the borrower. In which the entire principal amount and the interest amount has to be paid. The housing loan EMI amount is directly related to tenure. If the tenure increases, then the monthly EMI amount also increases.
- Interest Rate:
The monthly EMI amount depends upon the housing loan interest rate, which is given by the lending institution. Various factors affect the interest rates such as the borrower’s CIBIL score, the locations of the property, and many more.
While the interest rates will vary depending on your individual criteria and how risky as a borrower are you perceived, these are common thumb rules you can read up and ask questions on when you apply for a home loan.