Two friends – Shailesh and Gautam – were planning to buy a home at the start of 2017. Their urge to own a home became even more intense when they saw a deluge of rate fall across the banks in India. Interestingly, both of them zeroed in the 2-BHK flat in the same area. They both were disbursed with a home loan based on their eligibility. While Shailesh seemed to have done a lot of homework with regards to property search, EMI and others before finalizing a loan deal, Gautam was raw in his process by not paying attention to the essentials. And the result is there to see.
Shailesh is enjoying a smooth repayment besides being able to spend on the daily stuffs. Whereas, Gautam is struggling on both the fronts and has even defaulted on two successive loan installments, creating a strong possibility of lowering his CIBIL score.
One of the primary reasons of Shailesh enjoying a greater degree of comfort over Gautam is the fact that the former, before applying for a home loan, gave attention to the calculator and its importance. Gautam, on the other hand, didn’t give a thought to the calculator. So, as a prospective buyer, let’s understand the function of Home Loan Calculator so as to steady our repayment future. You can take this article as a guide to achieve the same.
Home Loan Calculator – What’s Special About It?
The word ‘Home Loan Calculator’ applies to a borrower from checking the EMI to finding the year-on-year repayment. It helps strategize your home purchase by telling you the right time to apply, giving you an idea of the tenure you should go for, among others. So, you need to glance at several calculators associated with a home loan. All such calculators are illustrated below.
Home Loan EMI Calculator
Your home search should be based on the income and repayment potential you have. When it comes to the repayment, you must know the EMI, which stands for Equated Monthly Installment, applicable to your home loan. The EMI denotes the sum of interest and principal amount payable towards a loan. Its calculation depends on three factors – loan amount, interest rate and the tenure. So, just put these into the calculator and get the indicative EMI on your screen.
When the loan amount is greater, the installments are expected to be on the higher side. This is where savings can help curtail the loan requirement and the amount of EMI. So, do use the savings, if any, to reduce the loan amount, EMI and the interest outgo from your pocket.
The interest rate should be the primary consideration for a borrower as it represents how cheap or costly the loan would pan out over the course of the loan. Shop for the best home loan rate to comfort your pocket in the age of growing inflation.
The tenure, interestingly, has a wider connection which many would be surprised to know. A lot of borrowers tend to opt for a longer tenure and end up paying much more than they should have had they been a little smarter in shortening the length of the loan while applying. Normally, a home loan is taken for a period of 20-30 years. When the loan is there for so many years, the scope for the interest repayment becomes huge. But you can reduce the repayment liability by choosing a relatively shorter tenure.
Example – A loan tenure of 25 years yields an EMI of ₹19,962 and interest outgo of ₹34,88,745 on a loan amount of ₹25 lakhs at an interest rate of 8.40% per annum. Whereas, a 20-year loan of the same loan amount at the same interest rate would result in an EMI and interest repayment of 21,538 and 26,69,027, respectively. So, the difference is quite visible here. Yes, the EMI jumps by ₹1,576 (21,538-19,962), but the interest comes down by as much as ₹8,19,718 (34,88,745-26,69,027) by choosing a shorter tenure of 20 years.
Home Loan Amortization Calculator
The amortization calculator indicates the repayment of interest and principal of each year. In addition, the calculator shows the outstanding balance at the end of each year. This calculator flashes adjacent of the EMI calculator.
So, there is no need to visit the multiple websites for doing all such preliminary exercises.
Reasons for Use Home Loan Calculator in a Nutshell
- Facilitates effective loan planning
- Available online
- Easy and accurate calculation
- Saves time for the users
Home Loan Calculator is thus the need of the borrowers as it helps them plan their loan journey in the most efficient manner possible. Before applying for a home loan, do look at the calculators and their findings so that you can take a right decision.