Home Loan EMI Calculator and It's Benefits

Planning is an important part of every endeavor of life. Be it buying property or taking a loan, both require a good amount of planning. Quick decisions, taken without planning can sometimes dent your finances very badly. Therefore, you need to plan well in order to make wise decisions. Taking a home also loan requires good amount of planning, as you are borrowing a hefty sum which needs to be repaid. Therefore, using a home loan EMI calculator can help you plan ahead. Paying off home loans available in India with the accrued interest within a stipulated period of time or the loan tenure requires precise financial planning.

You need to assess your repayment capability before you opt for the loan so that you do not end up in a financial crisis. Here, EMI calculator can be best put to use. A calculator used for computing EMI of a home loan is a home Loan EMI Calculator. It is an easy-to-use tool and can be used anytime free of cost calculate the monthly instalments that you will pay towards your home loan repayment. The calculator just requires a few details of your home loan and gives an accurate result. It is best to use home loan calculator in India prior to applying for a loan as it not only computes your EMI but also helps you assess your repayment capacity.

Read: How to get Home / Housing Loan

Home loan EMI calculator computes the EMI according to the details entered by you in the calculator. The EMI calculator for home loans works on the following inputs:

Loan Amount: The sum of money you borrow for purchasing a house is the home loan amount. The amount that can be borrowed depends upon the cost of the property as well as the repayment capacity of the borrower. (Note that a lender can only give 80% of the property value as loan.) This is called the principal amount of the loan and the rate of interest is applied to it. The final amount (post-levy of the interest rate) is then divided equally by the tenure of the loan. You can enter the amount you wish to borrow into the EMI calculator. Enter an amount keeping in mind that EMI or monthly instalments cannot account for more than 40% of your monthly income.

Interest Rate: This is the rate at which interest is levied on the amount lent. Home loan rates vary from one financial institution to another, so it is best to check the interest rates before applying for a home loan. Interest rate can be either fixed or floating. In case of fixed, the interest rate remains unchanged for the entire loan tenure and all loan EMIs are equal. However, in case of floating interest rate, the rates fluctuate with any change in the base rate and hence the EMIs vary.

Tenure: It is the time allotted to or chosen for repayment of the loan. Most of the loans come with flexible loan tenures. Home loans are long term loans with long repayment tenure of up to 20 years, in some cases even continuing for 30 years. You can choose a loan tenure as per your choice, but remember the longer tenure you choose the more interest you will have to pay.

Home Loan Interest Calculator Computes the Monthly Interest Rate. While choosing a home loan, the factor most people give importance to is the interest rate. It is the rate at which interest is charged on your home loan amount. Every financial institution charges interest on the lent amount. This rate is generally offered as an annual one. So, in order to calculate the monthly EMI, this rate needs to be converted into a monthly rate.

Read also: Home loan tax Benefits

To convert the annual rate into a monthly rate, you will need to divide the annual interest rate by 12, for example, if you are being charged interest at the rate of 12% per annum, then the monthly rate of interest on your home loan will be 1% per month. You can also use the interest rate calculator for calculating monthly home loan interest rates. Interest rate calculator is an online tool which lets you know the per month interest rate when you input the annual home loan interest rate.

Formula to Calculate Home Loan EMI:

Manual EMI calculation is a long and tedious process which can be time consuming and exhausting. For calculating EMI, you need to know the loan amount, the tenure you want to borrow the amount for and the interest rate that you will be charged. You should keep in mind that all that you enter into the EMI calculator should be in months, i.e. the loan tenure and the interest rate.

To calculate the home loan EMI the following formula is used:

EMI = [P x R x (1+R)^N]/[(1+R)^N-1],

In this formula, the letters stand for:

EMI is the equated monthly instalment

P is the principal or the amount that is borrowed as a loan

R is the rate of interest that is levied on the loan amount (the interest rate should be a monthly rate)

N is the tenure of repayment of the loan or the number of monthly instalments that you will pay (tenure should be in months)

It is not easy to calculate EMI applicable on your home loan using Excel or by hand, as it is a complicated one. Hence, it is best to use a home loan EMI calculator for the same. Using a housing loan calculator you can calculate the EMI within seconds and save yourself from time-consuming tedious calculations.

Benefits of using home loan calculator:

Saves your precious time:

Home loan EMI calculator saves you from the lengthy and time-consuming calculations by computing EMI in seconds! The moment you enter the details with reference to your home loan, the EMI calculator displays the Home loan EMI instantly.

Gives you accurate results:

Calculating EMI for a home loan manually includes many calculations and can sometimes yield wrong results. Wrong calculations can change your home loan EMIs, and you might make a wrong decision while choosing the home loan. Therefore, you cannot always bank upon manual calculations. It is always wise to use a Home loan EMI calculator to get accurate results.

Helps you better plan your finances

EMI calculator can be of great use as it not only helps you to calculate the home loan EMIs but also helps you to gauge your repayment capacity. By applying multiple permutation and combinations to the determinants of the Home loan calculator, you can find the EMI amount that you are comfortable paying each month. Never ever go for an amount that you will not be able to pay back as it might strain your finances and also affect your credit score in case of home loan repayment default.

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