The one thing that most people aspire to do is being able to own their own home. It’s on nearly every individual’s bucket list, and not a single day goes by without people thinking about the kind of space they’d like to call their own. The increasing cost of real estate has forced individuals to opt for a home loan to be able to afford their dream home. While applying for a loan isn’t too difficult, what most individuals struggle with is figuring out the kind of EMIs they’d need to pay every month to pay off the loan. This is where a home loan calculator comes into the picture.
A home loan calculator helps you assess the Equated Monthly Instalments [EMIs] that need to be paid to the lending company each month until the loan is fully repaid. This EMI amount is calculated on the basis of the home loan amount, interest rate and tenure.
Before we show you how they work, here below are ten important things to know about them:
- A home loan EMI calculator is an easy-to-use tool that allows you to instantly get an estimate of your EMIs.
- The formula used for this is:
EMI = [P . R . (1+R) ^n] / [(1+R)^ n-1]
Where, P denotes principle amount, R indicates the rate of interest charged every month, and N is the tenure of the home loan.
- The EMI calculator also helps calculate your loan eligibility, and lets you know how much finance you can apply for as your loan amount.
- Besides providing some personal details, you will need to feed in a few standard details such as the property value, the amount you wish to avail, and the repayment period.
- You can find these calculators on the websites of all financial institutions and banks.
- Advanced EMI calculators also consider local and state taxes, insurance, and your running loan EMI, if any.
- Typically, all the information that needs to be entered in the calculator can be easily found in the loan agreement details.
- The calculator also shows you your amortization schedule. This includes your monthly EMI with a break-up of the principal amount paid out and the interest attached. Further, the schedule indicates what the outstanding balance will be after paying each month’s EMI.
- Usually, an EMI is calculated on a fixed interest rate. However, in the case of a floating rate, the EMI amount would fluctuate based on prevailing market conditions.
- Using the home loan EMI calculator, you can simplify the financial data and get results instantly.
Now, to put things into perspective, let’s cite a simple example on how the home loan calculator works:
Assuming that your principal is Rs. 30 lakh, rate of interest is 9% per annum (9/12=0.75 per month), and tenure is 180 months,
Your EMI = ((300000*.75 /100*(1+.75 /100) ^180/((1+.75 /100)^180-1))) = Rs 30,428
Nowadays, purchasing your dream home has been made easier thanks to the home loan facility. To better plan your finances and your EMI outgo, it would be wise to use a home loan EMI calculator before signing on the dotted line. With the right figures on hand, you can plan a home loan package that works best for you.