Buying a house is a challenge made easier with the help of home loans. However, smooth sailing is all about timely repayment of your housing loan EMIs. Will that be possible without a clear direction? Not really! That is why accurately calculating your EMI before you apply for home loan is critical.
Importance of Calculating EMIs before Home Loan Application
Calculate home loan EMIs in advance –
- To determine home loan eligibility
A considerable aspect of home loan eligibility is your repayment capacity, something which EMIs help determine. For instance, if your EMI amount is found to be higher than what you can bear, you will not be eligible for that respective principal amount. But, by increasing the tenure, choosing a lower loan amount, or finding more-economical rates, you may improve home loan eligibility.
- To check affordability
When you take a housing loan, you sign up to shelve out a portion of the loan amount + interest payable every month in the form of EMIs. Lenders insist on using up only 30 to 40% of your monthly income in paying EMIs, or it could significantly hamper affordability. Knowing home loan EMIs in advance helps you draw the line when you feel that the EMI amount could disturb your budget.
- To decide the loan tenure
If you know your home loan EMI in advance, you can adjust your loan tenure. For instance – If the EMI amount is easily affordable, you can choose a shorter home loan tenure and not only pay off your loan sooner but also avoid higher interest outgo.
- For easy comparison between lenders
Every lenders’ offerings are different. Knowing the home loan EMI beforehand comes as a great advantage as you get to compare between lenders and choose the one with the more reasonable loan product.
How to Calculate Your EMIs
Home loan EMIs can be calculated via two methods – manual and automatic calculation. The automatic calculation via specialised online tools such as the home loan EMI calculator is a preferred mode since the process is fast, the results are accurate, and the calculator is user-friendly.
All you need to insert are three basic inputs – principal loan amount, home loan interest rates, and loan tenure – and the home loan EMI calculator will automatically display the EMI amount within seconds.
Factors Affecting Home Loan EMIs
Home loans are directly affected by the following factors -
- Principal loan amount
This is the amount of home loan that you borrow from your lending institution. The higher the principal amount, the greater will be the EMI that you will be liable to pay.
- Home loan rates
This is the rate of interest charged by your lender on your housing loan, often expressed as a percentage. The higher the interest rate you are charged on your home loan, the higher will be the EMI amount that you need to pay.
- Loan tenure
This is the period within which you repay your home loan. Your home loan EMI will be inversely affected by the loan tenure; meaning, the higher the loan tenure, the lower will be the EMI amount you will be required to pay each month and vice-versa.
So, calculate your EMI and apply for home loan with India’s leading lending institution – Tata Capital! We make buying a house a reality with easy home loans – high eligibility, low-interest rates, and minimum documentation hassles.