Plan Your Housing Loan with an EMI Calculator

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By Jenny

Homeownership offers many benefits. A home purchased through a home loan makes one eligible for tax savings. Further, with time, as the home loan amount decreases, the person’s equity in their home increases and so does their net worth. 

Home loans ease the process of home purchase. They also give homebuyers the chance to afford their dream home and pay for it slowly and conveniently over their desired loan tenor. However, home loan journeys prove most beneficial and uncomplicated when loans are availed of after conscientious repayment planning. 

Home loans are repaid through EMIs and EMIs for a home loan are calculated using this formula: 

Home Loan EMI = P x R x (1+R)^N / [(1+R)^N-1]

where P is the principal, R is the rate of interest, and N is the loan tenor in months. 

While we are not generalizing, it is safe to say that using this formula to generate EMI for different housing loan amounts and loan tenor combinations is an uphill task for most people with high chances of errors. It is here that a home loan EMI calculator becomes relevant. 

Home Loan EMI Calculator: Explained

The home loan calculator is a free-to-use online tool that lets loan applicants calculate their loan EMIs and judge the affordability of their desired loan. The home loan EMI calculator works on three details: loan amount, loan tenor and the rate of interest. Of these three, a loan applicant has no control over the rate of interest. Housing loan interest rates are decided by the lender and individuals reflecting high creditworthiness get the most competitive home loan interest rates. However, loan borrowers and home buyers can play with different combinations of loan tenor and loan value until they arrive at a loan amount that delivers affordable and easy-to-pay home loan EMIs. 

Home Loan EMI Calculator: Benefits

When it comes to home loan planning, the home loan EMI calculator is a tool that should compulsorily be a part of one’s home loan planning. Here is why: 

  1. The home loan EMI calculator helps one identify the right combination of loan tenor and loan value for them. The right combination is usually the one that delivers affordable EMIs that one can pay comfortably and without feeling hassled at any point in one’s home loan journey. 
  2. By sharing with loan applicants their tentative EMIs, a home loan EMI calculator gives them a chance to indulge in monthly budgeting, cut down unnecessary expenses and ensure enough funds in their account to honour their EMI commitment month after month. 
  3. Most home loan borrowers try to repay their loan before the agreed period. Becoming debt-free allows one to enjoy tension-free nights and plunge into the world of homeownership once again, i.e. if one’s financial standing permits it. Prepayments go a long way in helping one become debt-free quickly. However, prepayments must be timed well for maximum benefit. A home loan EMI calculator gives borrowers access to their amortization schedule, thereby allowing them to find the ideal time for prepayments as well as foreclosure. 

Home Loan EMI Calculator: How to Use This Powerful Tool

All home loan EMI calculators are actually quite straightforward to use. They work on three details. Here is how to use a home loan EMI calculator: 

  1. Enter your desired loan amount. 
  2. Input your desired loan tenor. 
  3. Enter the rate of interest that you are being offered. 
  4. Click on calculate. 

As soon as you enter these three details, the output page will show you your loan EMIs, the total interest you will have to pay your lender on your selected combination of loan value and tenor and the total cost of borrowing the loan. Other than these details, the output page will also display your amortization schedule, which can prove pivotal in repayment planning and identifying the right time for a home loan balance transfer

Concluding Remarks 

A home loan embarks one on a long journey and this, journey can become filled with hassles if one is not well prepared. A home loan EMI calculator helps one prepare for this journey, recognize mistakes early on and avoid them. A part from a home loan EMI calculator, home loan applicants must also use the home loan eligibility calculator to enhance their chances of loan approval and avail of the loan on favourable loan terms and conditions.

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