What was the first major financial decision you made when you started earning? A majority of you will say –to save and buy yourself a house! Home is a man’s refuge and everybody dreams of owning a one and works towards that one goal. For a few, it is simply yet another investment decision; for another, a home loan means the world to them. The sentiment behind owning a home may differ from one person to another. However, property prices are always skyrocketing and one needs to be cash-rich in order to purchase a house upfront, but that’s rarely the scenario and people may not always have the funds to fuel their purchase. Hence, the financial institutions offer loans to individuals seeking assistance.
Features of Home Loans
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• Home loans can be availed for individual house purchase or to reconstruct an old house. You may apply for a home loan as an individual or jointly with your spouse or with any other family member. It can be taken for structural improvements like painting, waterproofing, plumbing, electrical, tiling, or flooring work.
• Home loans are usually for long tenure periods (up to 30 years). Any individual older than 18-21 but not more 60-70 years of age can avail this type of loan. The interest rates under this type of loans usually fall within 11.25% – 14%. However, if you are registered under the Pradhan Mantri Awas Yojana Scheme, you can get the loan at 6% per annum only.
• Various financial entity provisions for a top-up loan on the already existing home loan. This top-up amount can vary from one financial entity to another.
• The maximum loan amount that you can avail depends on your credit score/worthiness. This borrowing potential is calculated keeping in purview the down payments, your age, income, occupation, margin requirement and collateral security to name a few.
• You are also subject to home loan tax benefits under the following:
1. The Principal amount under section 80C, where an individual or a member of the Hindu undivided family can avail tax benefits
2. Interest payment under section 24(b), where tax is deducted on the interest payable for a loan taken
More About the Home Loan EMI Calculator
• To eliminate the skepticism from your home loan, you can use a housing loan EMI calculator. Before making this financial decision, you need to assess your repayment capability. This is where you need to make the most of a home loan calculator.
• It is a very easy tool to use and can be used anywhere for free of cost. All you need to do is keep handy a few details related to your home loans such as the home loan amount, interest rate, and tenure. The calculator will return results displaying the monthly payments, total interest payable, and the total amount payable. With the help of this tool, you can also compare the loans from different financial entities. By taking into consideration the various options available, you can take the best financial decision to maintain stability in your future financial health.
How Does It Work?
If you are curious about the working formula of a home loan repayment calculator, this is all that is:
E = P x r x (1+r)^n/((1+r)^n – 1)
E is the EMI,
P is the amount that you wish to borrow,
R is the interest rate,
N is the tenure period.
Why Do You Need It?
Do you really need to use a home loan EMI calculator? Yes, if you want to be 100 percent sure about your next biggest financial decision!
• It offers the convenience of calculations. The calculator can compute the amount within a matter of few seconds. This lets you compare several different loans within no time.
• It is accurate. The chances of error are fairly high when you are calculating the amount manually. To avoid any error, it is best to use an EMI calculator.
• It is fast. Just imagine the time you would spend on calculating EMI using pen and paper. Don’t forget you will have to calculate not for one entity but different financial entities.
• The amortization tables are an important part of an EMI calculator. It gives a representation of the future expense. It tells you exactly how the loan will progress over a period of time. It gives a clearer picture of the total amount that you have paid back both in terms of the principal and the interest.
• The results returned by the EMI calculator are graphical in nature, which is better to understand and register in mind.
This calculation will help in maintaining sound financial health in the future. The future is uncertain; hence, your financial decisions must be such that you can cushion set-backs without facing a financial crisis. Extreme caution must be adhered in case of home loans due to the nature of the loans. Ideally, a home loan must not exceed 50%-60% of your monthly earning as any income higher than this will put a strain on your financial health. You need to keep the costs of education, medical expenses, utility payments and lifestyle costs in your line of sight while taking a home loan.
With the help of a home loan interest calculator, you can gauge the various options available, calculate and plan your monthly budget and plan your savings or investments accordingly.