From the time you think about owning a house to the time you actually own one, you follow many steps. House purchase or construction is a big financial decision, and it takes courage and meticulous planning before your dreams see the light of the day.
A homeor housing loan EMI calculatorcan make the seemingly complex task of home loan selection simpler. Here is how you can get the best estimates using a home loan EMI calculator. But before discovering the right way to calculate EMI, you need to know about the parts of EMI and the amortisation schedule.
Decoding the EMI
EMI, the abbreviated form of Equated Monthly Installment, is the combination of principal and interest spread out in an equal amount across the loan term. The lender calculates the EMI based on the loan amount, rate of interest, and tenure. Generally, lenders do not allow the EMI to cross 50% of the borrower’s net monthly income. For example, if your monthly income is INR 50,000, your total EMI cannot exceed INR 25,000.
What is Home Loan Amortisation Schedule?
A home loan amortisation schedule elaborates and contains details of the outstanding balance (both before and after EMI payment), the principal component, the interest component, and the EMI amount. The amortisation schedule is important since it helps you decode the EMI and claim taxation and other benefits. It can also enable you to reduce the debt. A home loan EMI calculator gives you complete flexibility to know the details of your home loan.
Home Loan EMI Calculator – Elements
A home loan EMI calculator has three boxes in which you need to enter a few figures to get the best results. Here is a laydown of the details you need to enter to get the details:
- Principal – Also known as the loan amount, it is the most important component of a home loan. The principal can be up to 90% of the property’s value. However, the loan amount depends on factors like the borrower’s income, credit score, nature of income, and property status, among others. The principal is directly linked to the EMI. The higher the principal, the higher the EMI.
- Rate of Interest – Like the principal, housing loan interest ratesdepend on various factors, including credit score, income, property status, etc. For example, if your credit score is above 800 and the property you wish to construct or purchase is in a prime location, you can expect the best housing loan interest rates.
- Tenure – Home loan tenure usually ranges between five years and thirty years. The shorter the tenure, the lower the housing loan interest rate. However, if you select a short tenure, your EMI amount will be substantially higher.
While using a home loan EMI calculator, you need to enter details like the principal, rate of interest, and tenure. PNB Housing’s home loan EMI calculator allows you the option to change the principal, rate of interest, and tenure to arrive at the best EMI.
A home loan EMI calculator simplifies the process of home loan application since you can know your eligibility well in advance. As you find the EMI amount, it becomes easy for you to take the steps required to get the best housing loan interest rate.