Easily Plan Your Home Loan with an Online EMI Calculator
Purchasing your own house is not a far-fetched dream today, thanks to the facility of home loans. Using an online home loan calculator, you can also get a prior estimate of your EMIs and interest payments in the planning stage.
Usually, before applying for a home loan, you must assemble all the crucial documents a bank might require. Documents like Aadhar card or PAN card, income tax statements, salary slips, address proof, photo identification and property documents. But before moving forward, let us understand what a home loan is.
What is a Home Loan?
A home loan or a house loan is the amount you borrow from a bank to purchase a house. A home loan equated monthly instalment (EMI) pays that borrowed bank amount with interest rates within a fixed period.
For example, if you are buying a home loan for a property of ₹50 lakhs at an interest rate of 2% within the tenure of 5 years, then you will have to pay an EMI of ₹87,639 every month.
You can use an online house loan calculator to calculate the above figures. You get the EMI estimate and the total amount of interest you pay monthly, yearly, and throughout the tenure.
How to Pay a Home Loan EMI?
Home loan EMIs have made it possible to buy your desired house without altogether paying for it in a single day. You can live in your dream house and still pay for it in regular intervals, which is consecutive months in a year or years according to what you choose as the tenure to pay the amount with a particular interest rate the bank offers.
Remember that the more the tenure, the more the total interest payment will be. More interest is because it keeps mounting every month. A home loan EMI, though, gives you the freedom to pay in months. But, it has its own cost.
A bank usually offers loans for a maximum tenure of 30 years. Though a bank might ideally allow you to apply for 50% of your monthly income, many do not prefer to exceed 33% of their monthly income to cover their EMI.
How to Calculate Home Loan EMI?
A manual house loan calculator will work in the following way:
- Segregate the principal amount, interest rate and the tenure you will pay the EMI in.
- Now calculate your house loan EMI by using this formula: P x R x (1+R)^N / [(1+R)^N-1], where P is the principal amount, R is the monthly interest rate, and N is the tenure.
For example, suppose the principal amount is ₹8,00,00,00, the monthly interest rate is 5%, and the monthly loan tenure is ten years, i.e., 120 months, then your house loan EMI according to this manual home loan EMI calculator, will be:
80,000,00 x 0.004 x (1+0.004)^120 / [(1+0.04)^120-1] = 84,852
Here, we calculate the value of ‘R’ on an annual rate; hence it is derived by:
5/(12×100) = 0.004
This method can be tricky, and you might end up scratching your head most of the time. Achieving accuracy by applying this method is a matter of practice.
Considering all the above factors, you can calculate the correct amount of home loan EMI online. Then, in a fraction of a second, you can find out your next month’s instalment, the amount of money you will pay in the particular tenure and the total interest amount.
The online house loan calculator tool keeps track of your future instalments and prepares you mentally to manage your expenses.
Benefits of Online Home Loan EMI Calculator
The following are the benefits of using an online home loan EMI calculator:
It Saves Your Time
With accurate results, the online home loan calculator gives results within a fraction of a second.
The Online Tool Is Free Of Cost
It is not a paid tool but a free online tool. Just type a few words on Google, and you can use the tool within a few clicks.
Mentally Prepares You To Manage Your Expenses
By keeping track of your coming instalments, the home loan EMI calculator helps you prepare mentally to save yourself from any penalty directly resulting from not paying the monthly instalments. It also allows you to curb your other expenses.
Helps You Make The Right Decision Before Buying A Loan
You can increase and decrease the tenure of your instalments. You can decide whether you want to pay a lot of money by increasing the term or if you want to spend more money within a few months, paying the lower total interest rate.
No Need to Call or Visit Your Bank
The home loan calculator holds the preciseness to tell you your exact total interest rate and monthly instalments so that you do not have to visit your bank or call the bank officials to keep track of your EMI.
Helps You Take Decisions Regarding Prepayment
You can also ask your bank to prepay your loan if you have sufficient funds. You may do so only if you are aware of your remaining instalments, which is possible with the help of the online tool.
You Can Compare Loan Offers from Different Banks
Not every bank gives you the same interest rate. So, calculate what different banks offer and arrive at the correct conclusion. This way, you can buy the best home loan that suits your budget.
On a Final Note
Do not confuse a home loan with a mortgage loan. You take a home loan to buy a new property and a mortgage against an existing property. The only purpose of a home loan is to buy a new property.
However, you can use the money you get with a mortgage loan as per your will for any investment. So the home loan EMI calculator proves to be a small yet significant step to help you make a one-time decision to buy your favourite property.