During FY 2018, penetration of housing finance to both rural and urban populations grew in double-digits. At 10% of India’s GDP, it represents a 0.5% rise from the previous FY. This significant growth has been all thanks to the increased availability of housing credit combined with government initiatives. Besides, the availability of lower interest rates along with other beneficial features currently makes the dream of buying a new home a reality for many individuals.
Housing Loan Market Overview:
- A number of financial institutions – More than 80.
- Housing loan share held by the top 5 companies – 78%.
- The average size of a home loan from housing finance companies – Rs. 30 Lakh.
Nevertheless, as it is a long-term loan, borrowers often face difficulty in managing finance and paying EMIs in time. You can, therefore, plan your repayments with the use of a EMI calculator that can help you make the right decision regarding your loan.
What is an EMI calculator?
It is a financial tool that allows you to estimate the monthly installments related to your housing loan. You can arrive at necessary data regarding your loan like the EMI amount, total interest accruing on your loan, total amount payable at the tenure’s end, etc.
Such estimations assist you in planning your advances regarding home loan repayments, the finances you need to allocate for meeting your monthly obligations and plan on such other details. With this calculation, you can reap the benefits of calculating EMIs before taking a home loan.
The calculator uses an amortization schedule prepared by the lender to compute these results. Hence, the principal and interest components in each EMI vary. However, EMIs remain the same throughout your loan tenure.
Housing loan calculator – How to use for optimum planning?
The calculator uses three inputs to compute the results, i.e., the principal amount, loan tenure and home loan interest rates.
- Input the Loan Amount
First, you need to enter your preferred loan amount. You can arrive at a suitable loan amount as per your budget for house purchase. To do this, you can look out for the average price of the property prevailing for your chosen area.
- Provide the Loan Tenure
Next, you have to input the housing loan tenure. Your decision regarding the tenure is critical as a suitable tenure will make repayments convenient. Selecting a longer tenure makes repayment affordable as the loan amount is distributed into more number of months. Thus, it reduces your EMIs. With a smaller EMI amount, you can pay in time and avoid the outcomes of defaulting on your home loan EMI.
As for a shorter tenure, it allows you to repay your loan early. You may, therefore, weigh in the advantages and disadvantages and select a suitable tenure for your housing loan.
- Input the Interest Rate
At last, the EMI calculator requires you to enter the interest rate at which you will avail a home loan. The rate of interest you select directly impacts the EMIs and determines your affordability.
So, once you have entered these details, you can input the current home loan interest rate of your lender to arrive at the payable EMI. You can also run a comparison of interest rates offered by different lenders to select the most affordable home loan.
Once you submit the required details, the results will be immediately visible. Check the EMI you will need to pay. If its amount exceeds your repayment capacity or if you can pay a higher EMI than the one computed, you can make changes to your data and recalculate a suitable one.
You can plan your repayments efficiently through the EMI calculator computations. With this information, you can repay your housing loan effectively to maximize the benefits and close your home loan effectively.