Buying a home could be regarded as one of the big steps in life. The feeling of having bought a home gives you a huge sense of accomplishment. It is becoming harder to buy through just savings for home finance as the property rates have skyrocketed in recent years. The solution to that is to get a home loan.
But just getting a home loan isn’t the end of a home buying journey. It would be best if you considered all the factors involved to make a better decision about your finances. Considering the huge loan and the tenure involved, calculating your monthly EMI using a home loan calculator will help you plan your finances.
What is a Home Loan Calculator?
A home loan calculator is a tool that helps you plan your cash flows to repay your home loan without financial stress. Home loan calculators are available in your lender’s online portal. It helps you calculate the amount to be repaid every month in an instant. All you need is to input your loan amount, tenure and interest rate in the calculator and adjust these parameters to recalculate it each time.
Key Aspects to Know When Applying for a Home Loan
How To Calculate Your Home Loan EMI?
Traditionally the home loan EMI is calculated using the formula:
EMI = [P x R x (1+R) ^N]/[(1+R) ^N-1]
Here, the P denotes the principal amount
R denotes the rate of interest and
N denotes the number of years.
You need to figure out the principal amount, the rate of interest (depending on the choice of the lender for availing home loan), and then you can tweak the value of tenure to arrive at an EMI that best suits your monthly budget.
Calculating the optimum EMI that suits your budget by changing the values each time is undoubtedly cumbersome as well as erroneous. The home loan calculators simplify this complicated process.
How Does a Home Loan Calculator Work?
Using home loan calculators to plan your home finance is a very simple process. The online home loan calculators apply the above formula to calculate the monthly housing loan instalments for you. It is done in few simple steps:
First, enter the values of the principal amount into the calculator. Then enter the rate of interest. Now, based on your repayment schedule and capability, slide the slider for the tenure bar or enter the desired loan tenure. Once you have done this, the calculator shows you the corresponding EMI. If your principal amount is fixed, your EMI will vary based on the values of tenure and rate of interest.
The best part about using a calculator for home loans is that it shows the EMI amount of every month and the balance after each EMI. It also shows how much the interest amounts to over the tenure.
Notice that the interest amount grows with increased tenure, so using a calculator before availing your home loan can help you determine the best financial plan without interfering with your financial needs.
Home loans are huge investments that go on for a longer tenure of up to 20 years. Hence, it is imperative to choose the lender that offers convenient and competitive home loan interest rates. Visit Grihashakti for more information on home loans.
