Home Loan one of the life-supporting toll for the majority of employees or self-employed. Have you calculated, Is it really financially beneficial or you are paying your valuable earning to the Bank. Frankly speaking, you are paying more than double to the Bank for your Home Loan.
But the fact is “You don’t have a choice” Because you have other responsibilities in your life.
Owning a House attached emotional value for every person, Living your life in the rented house always have the possibility to vacant somehow or other.
Home loan in real estate industry work, without home loan a large portion of people are forced to live in rental apartments. Loan for our own residence without having money to acquire a house. Home loan EMI calculator is one of the tools that help you plan your own house.
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What is EMI (Equated Monthly Installment)
Equated Monthly Installment (EMI) is the amount payable every month to the leader by the borrower.
EMI is very popular suggest among employee, which allow them to grab important needs of life.
For instance – House, Car, Child education, family trip, child marriage.
EMI is calculated with the principle and along with interest paid to the bank or any other financial institutes till the loan amount is paid.
EMI is as flexible as per the requirement of the borrower, like period of the loan, amount of loan, payment made (periodically).
How to reduce home loan tenure by Increasing EMI?
The basic principle is that faster you eat into the principal amount, the lesser interest burden you have to bear.
There are two ways to get your target:
- Decrease the interest amount of your loan
- Repayment of Principal amount faster.
For Instance: Let’s consider a loan of Rs 50 lacs, tenor 25 years and an interest rate of 10% p.a. EMI comes out to Rs 45,435 per month. Total Intrest liability comes out to be Rs 86.3. Let’s consider the following scenarios and see if how you can bring down your total interest cost.
Paying Additional EMI Annually
An additional EMI payment change the complete picture of the EMI payment model. If you pay additional EMI annually or divide an additional EMI amount (Rs 45,435) every month, it comes to be Rs 3786. All you have to do is enter Extra payment every month. Your total interest amount comes to be Rs 61,16,066.30. Total savings will be Rs 25 Lakhs.
Refinance at Lower Interest Rate
Somehow the fluctuation of interest rate many times banks do not pass on the rate cuts to the existing borrowers, which results in switching process of customers to such bank which offers a lower rate to the customers, overall if you get 1% of interest rate saving for 25 years on Rs 25 Lakhs of the Loan amount. You can save approx Rs 10.42 Lakhs. (This amount is used for future other financial planning like education or marriage).
Benefits of Using Home Loan EMI Calculator
Plan your Better Future
Home loan calculator revels you projected scenario for doubt regarding the payments of your ongoing installments, you can plan your other investment and future money requirement, it will also help you plan your budget and taxation accordingly.
Sometimes borrower takes the Home loan and after some time find out that the payment bit difficult due to higher EMI. A home loan EMI calculator helps you to make informed decisions.
You Can Find Your Loan Eligibility
As mentioned above, a home loan calculator helps you to find the EMI amount of the loan. If you are having any ongoing loan then you have to calculate your total EMI including the current EMI with the running one. You also have to check that the total of the EMIs should not be more than 40% of your net monthly income.
For instance: If your monthly salary is 1 Lakhs you are only eligible for Rs 40000 monthly EMI, in that case, you must calculate your Home loan before applying for your Home Loan, the lender may reject the loan application.
It is recommended to pay off your existing loan before applying the new one.
Also Read: Capital gain tax on property sale
The significance of Home Loan
Home loan basically available not only for the purchase of a house but you can also avail it for the purchase of land, house renovation.
The percentage of interest changes from time to time depending on the market scenario.
The eligibility of home loan depends upon some fundamental requirements of the borrowers like income as per Form 16 period of current employer, and most importantly your credit score.
To know your credit score click here
The home loan is repaid over a long period of time unless the borrower finds another way to repay the loan amount.
The repayment terms vary from bank to bank according to the safety norms and customer flexibility.
Download the link below and calculate your own EMI just by inserting amount, time period and rate of interest.
This sheet gets you home loan EMI calculator excel sheet with prepayment option.