Buying a home is one of the biggest financial decisions you will ever have to make, and years of hard work go into gathering adequate funds for making a home purchase. Today availing of a new home loan and refinancing your existing home loan has become easier and uncomplicated with more housing finance available at nominal cost. The primary factor that determines how affordable this experience is your EMI.
An Equated Monthly Instalment is the sum you will pay to your lender every month. It is calculated based on the principal amount, the repayment tenor and the current home loan interest rates. However, the calculation is a complex one and will require painstaking computations. To avoid errors, use an online home loan EMI calculator. This will help you plan for home loan better and even gauge how affordable it will be for you.
Here’s how using a home loan EMI calculator helps:
Forecast your EMIs in an Instant
By simply feeding in your principal loan amount, your interest rate and repayment tenor you can easily compute your monthly EMIs. For instance, if you take a loan of Rs.50 lakh and you are paying an interest rate of 10% over a tenor of 120 months, your EMI will be Rs.66,075. Your total interest payable will be Rs.29,29,079 and your total payment will be Rs.79,29,079. Working on a formula, the EMI calculator gives you instant and accurate results that would otherwise involve complex calculations. The formula it works on is:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1] where ‘P’ represents the loan amount or principal, ‘N’ is the number of monthly instalments or the tenor you choose and ‘R’ is the interest rate per month.
Choose the Right Principal Amount
Arriving at the EMI will help you evaluate if the loan amount you are looking to borrow is right for you. For example, in the above calculation, the EMI is Rs.66,075. If however, you know that you cannot spare more than Rs.50,000 towards home loan EMIs, then you have the option of either increasing the tenor or settling for a smaller loan. If in the above example, we reduce the loan amount to Rs.37,83,000 we get an EMI of Rs.49,993. With computations such as these, the calculator will help you to properly assess your budget and help you search for the right homes accordingly.
Tweak your Tenor to Save More
A lengthy tenor gives you the benefit of smaller EMIs, but it also means that you will pay more on interest over the years. For example, in the above calculation increasing the tenor by 24 months gives EMIs of Rs.59,754, but total interest payable is Rs.36,04,555. Similarly, decreasing the tenor by 24 months gives you higher EMIs of Rs.75,871 but lower overall interest payments of Rs.22,83,584. In this way you can push yourself to choosing the shortest possible tenor as per your income by using the EMI calculator.
Compare Lenders before Signing Up
Lenders may offer marginally different interest rates as per their eligibility criteria and norms. While the differences may seem marginal to you, when you do the computations the actual figures are large. Returning to the above example, if a different lender was offering the loan at a 10.5% interest rate, your monthly EMIs will amount to Rs.68,875 and total interest payable will be Rs.32,65,006. With just a 0.5 increase in interest rate, you end up paying Rs.3 lakh more in repayment over the loan’s tenor. In this way, the EMI calculator can help you sift between the nuances in each lender’s loan offer to choose the best and most affordable one.
Once you have arrived at the right loan amount and tenor, get your hands on the required funds with a home loan from Bajaj Finserv. Here you can avail of up to Rs.3.5 crore, a flexible tenor of up to 20 years and the most competitive interest rates. First-time homeowners can make use of the PMAY scheme and enjoy a subsidy on interest up to Rs.2.67 lakh. This home loan has other attractive features like zero part-prepayment and foreclosure fees, and a range of financial tools like housing loan eligibility calculator, stamp duty calculator and debt consolidation calculator to make your home financing hassle-free.
Make your dream of owning a home a reality by checking your pre-approved loan offer today. This will help you access a customised deal on your home and apply instantly without any hassles whatsoever.