A home is what we all cherish throughout our life. It gives us the freedom to stay at our favourite house with the desired dimensions. From the hassles of shifting from one house to another in the case of a rented accommodation to a greater degree of comfort by staying in your own home, is the journey that you go through.
Homes are bought mostly on loan being provided by banks and housing finance companies (HFCs) for a maximum time period of 30 years. However, before diving into a home loan, you would want to calculate its cost. You would search for the calculators that can help serve your purpose.
Your quest of a calculator ends with a housing loan calculator which computes not only the loan amount you are eligible to receive but also the EMIs payable from your account. So, let’s just screen through the calculators of the housing loan.
Housing Loan Eligibility Calculator-
Won’t you appreciate the idea of knowing the expected loan amount beforehand? Most certainly, you would answer in affirmative, right! The loan eligibility is set using the housing loan eligibility calculator, which based on your income and savings, sums up the loan amount. But you may not know that the function starts with the calculation of per lakh EMI before considering the income and saving criteria. Let us take the help of an example to understand the function of the calculator better.
Example-Ravi Sharma, a 30-year old IT professional, wants to apply for a home loan of 40 lakhs at XYZ bank that charges an interest rate of 9.50% per annum. He earns a salary of 36,000 and saves around 18,500 on a monthly basis. Let’s see whether Ravi can be granted a home loan of the said amount or not. Staying true to the way the function was narrated, first calculate per lakh EMI, which comes out to be ₹ 841. The eligibility calculator will work based on the formula written below.
Loan Eligibility- ₹ 1,00,000 x savings/per lakh EMI
– ₹ 1,00,000 x 18,500/841=₹ 21.99 lakhs (Approx.)
The loan amount, which can be financed by the bank, is nearly half the amount he wanted to apply for. If he has the savings of ₹ 20 lakhs, the proposed home could well be his. However, if it is not the case, he may have to search for a property whose cost fall in the range of 20-22 lakhs.
Housing Loan EMI Calculator-
The calculation of the monthly installment is made possible with the help of housing loan EMI calculator. With a mere entry of loan amount, the rate of interest charged and the tenure, the calculator arrives at the EMI, which extends to Equated Monthly Installment. The EMI includes both interest and principal portions of the loan payable. The interest portion remains more than the principal in the initial periods of the loan. At the twilight of the loan, the principal becomes more than the interest.
The EMI can be calculated with the help of a formula below.
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
P=Principal Loan Amount
R=Rate of Interest
N=Number of Monthly Installments
For example-You applied for a home loan of ₹ 35 lakhs at SBI for a tenure of 20 years. The interest rates range from 8.60%-8.70% per annum. At this rate, you would need to pay an EMI of ₹ 30,596, ₹ 38,42,967 and ₹ 73,42,967, respectively.
Housing Loan Amortization Calculator-
Are you aware of a calculator that can show the repayment schedule year-on-year of the proposed housing loan? If not, then start using the amortization calculator that does the same. The calculator shows the yearly repayment of principal and interest amounts, besides demonstrating the outstanding balance of the loan each year.
The reason why it is important because by glancing at the calculator you can time your prepayment to perfection. Yes, you can prepay the loan and save on the massive interest outflow that would otherwise cause a huge hole in your pocket.
The prepayment can be done when you would see a hike in your salary in the wake of promotion or due to the accumulated savings. Floating rate home loans come with zero prepayment fee across most lenders in India.
Can you afford to miss the calculator in your home loan sojourn? No, na! So, keep using the calculator to let your stay at the dream home memorable forever.