Recently, an increase in disposable income, easy availability of funds and affordable interest rates has encouraged prospective home buyers to invest in their dream property. A TransUnion CIBIL report revealed that the volume of home loan inquiries increased by 9.1% (y-o-y) in November 2020.
This growth has been particularly bolstered by lenders slashing their interest rates by quite a few per cents. To leverage the benefits of the reduced rates, potential borrowers must learn how to calculate their loan EMIs. In this scenario, they can utilise a housing loan interest calculator to compute accurate results.
Calculate home loan interest using an online calculator
The formula to calculate home loan EMIs is given as follows –
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Where P is the principal, R is the housing loan interest rate, and N is the tenor chosen.
It is imperative for you to know this calculation process while opting for a home loan.
Follow the below-mentioned steps to know how to calculate home loan interest and EMI payable.
- Open the home loan EMI calculator on a reputed financial institution’s website.
- Enter the loan amount, tenor and interest rate.
- Click on “calculate” or adjust the bars.
- The result will appear on the screen immediately.
Undertaking this process before opting for a housing loan will allow you to plan your finances better and manage monthly liabilities efficiently. You can also reduce your home loan EMIs with a home loan balance transfer if you find that you can reduce EMI outgo on your existing loan after using this calculator.
Apart from knowing the process of using a housing loan interest calculator, you also have to know the different aspects that affect the interest and EMIs.
Factors that affect home loan EMI
Following are the top reasons that influence the home loan EMI.
- Interest rate
Home loan interest rate can be of three types, fixed, floating and mixed. While the first two are self-explanatory, the last one is a combination of both. In this case, the interest rate remains floating for a specific period, and then it becomes fixed. Lenders generally levy a higher interest rate for this particular type. Eventually, the overall interest and EMI outgo increase when one chooses it.
For greater convenience, individuals need to know how to choose between floating and fixed interest rates.
It is true that for a longer tenor, you have to pay lower EMI. Nonetheless, with a longer tenor, the net borrowing cost increases.
- Loan amount
The loan amount also decides how much interest you have to pay a lender. You have to pay more interest on a higher loan corpus. Moreover, the lenders may also hike their interest rate a little on the large sum due to risk associated with it.
To avoid this issue, you can also opt for a higher down payment that eventually decreases the interest outgo. You can use a housing loan interest calculator to know the interest and EMIs.
Top HFCs offer home loans with competitive interest rate. You can also reduce the interest payable further by choosing a flexi loan facility. Here, the interest is levied only on the fund utilised.
These institutions also provide pre-approved offers that make the loan availing process simple and saves time. Such offers are available to existing customers on various financial products like loans against property, home loans and several others. You can check your pre-approved offer by entering your name and contact number.
Home loan eligibility is another factor that determines the interest rate of a home loan. For instance, lenders charge an additional risk premium on top of their current interest rate if the credit score of the borrower is below 750.
With access to a housing loan interest calculator, individuals can determine the fund’s affordability and ensure a smooth repayment.