A home loan is a vital part of most house owners’ lives. It simplifies house construction or purchase by providing funds of up to 90% of the property’s prevailing market price. A home loan calculator, also known as home loan EMI calculator, lets you find the real cost of availing of a home loan and enables you to stay prepared.
The following sections elaborate on the various facets of a home loan calculator and explain its mechanism.
What is a Home Loan Calculator?
A home loan calculator is a simple online tool that allows you to calculate the cost of a home or housing loan. It displays the EMI you will pay monthly after applying for a home loan.
Home loan EMI consists of two components – principal and interest. Principal refers to the amount you seek from your lender to purchase or construct your dream home. The principal depends on your debt-to-income ratio, usually 50%. So, if you earn INR 50,000 per month, the EMI amount cannot exceed INR 25,000. And if you have other loans, the amount will be lesser. So, the principal amount is determined according to your EMI payment capability, which depends on your monthly income.
The second component of home loan EMI is the interest. Interest refers to the extra amount (charge) you have to pay to get the loan amount in your account. Since the rates change often, you must check the home loan interest rate today before using a home loan calculator.
Let us now understand the mechanism of using a home loan calculator.
Home Loan Calculator – The Mechanism
Modern day lenders offer various online tools to simplify home loan calculation. Besides the home loan calculator, you can also get other tools like the home loan affordability calculator, eligibility calculator, tax benefit calculator, stamp duty calculator, and balance transfer calculator. Here is what you need to enter in the home loan calculator to understand the real cost of a loan:
- Principal – As mentioned, principal refers to the amount you want to get from a lender for house construction or purchase. You must enter the principal (loan amount) in the home loan calculator’s first box.
- Interest Rate – Enter the home loan interest rate today in the calculator’s second box. The interest rate depends on various factors, including the borrower’s credit score, age, property location, monthly income, credit history, tenure, and the like. It is wise to consult the lender before entering the interest rate in the calculator.
- Tenure – You must enter the loan term in the calculator’s third box. Home loan tenure usually ranges between five (5) and thirty (30) years.
After entering the principal, interest rate, and tenure on a home loan calculator, it shows you the monthly EMI you need to pay. You may change the inputs to arrive at a suitable loan amount and EMI.
Home Loan Calculator – Top Benefits of Using It
Free of cost
Generally, lenders provide home loan calculators and several other tools for free. However, you must visit the lender’s website to use the calculator(s). Once you open the calculator, you can use it as many times as you want to calculate your EMI.
Easy to Use
You don’t need to be an expert in computer or mathematics to use a home loan calculator. The three things mentioned above are all you need to estimate your loan-related liabilities.
Home loan calculators eliminate the possibility of making mistakes. Since the calculation is done digitally instead of manually, there is no room for error. Hence, your result is 100% accurate and can help you plan your finances properly.
A home loan calculator enables you to compare lenders seamlessly. You can inquire about the interest rates offered by different lenders and use the calculator to check the EMI. This can help you make informed decisions.
An online home loan calculator eliminates the need to visit lenders’ offices. You can conveniently use your smartphone or desktop/ laptop to open the calculator and check your loan eligibility and EMI. Moreover, you can also find the home loan interest rates today to enter the correct amount in the box provided and get accurate estimates. So, what are you waiting for? Open the home loan calculator to calculate your loan EMI.