Owning a home is a costly incidence, so if you’re thinking about it, then a home loan is your best bet. This long-term financial obligation is a great way to secure a roof over your head and also enjoy a range of additional benefits. For instance, as a first time home buyer, you can claim up to Rs.4 Lakh in tax deductions, combining both interest and principal repayments in year. However, before committing to such an obligation, you should research every aspect to ensure that your home loan borrowing is smooth and repayment is within your reach. This includes checking the home loan eligibility criteria, and forecasting your EMIs to plan repayment.
While checking the eligibility criteria of your preferred lender is easy, calculating repayment options can be hassling unless you use the housing loan EMI calculator. This calculator computes your EMIs and also gives you an accurate result of the total interest payable and the total loan amount payable. You can access this calculator online at almost all lender websites for free and carry out the desired calculation with ease within seconds.
To understand the importance of an EMI calculator, look at the 4 ways in which you can use this tool to your benefit.
Compare Various Loan Offers to Get the Most Affordable Option
An effective way to get the maximum value from your home loan is to pick the best suited option available in the market. This is only possible if you compare the loans with each other and your comparisons must have precise values. An EMI calculator guarantees precision and better yet, it lets you tweak the inputs to give you the most accurate comparison. Use this to your advantage and leverage the power of an EMI calculator to get the maximum value for your commitment.
Adjust Your Loan Requirements Based on the EMIs
Use the EMI calculator to help you decide on the amount you want to borrow. Borrowing larger amounts means higher EMIs and this could make it harder to keep up with repayment. Use the calculator to find the EMI sweet spot by changing the values for the home loan interest rate, tenor and loan amount. This will also help you re-evaluate your home investment altogether, because you should not risk your financial well-being on a home you simply cannot afford.
Use the Calculator to Accurately Compute Your EMIs and Plan Repayment
The main function of an EMI calculator is to accurately compute your EMIs on your home loan. This includes you inputting the right values for the loan amount, tenor and interest rate. Knowing your EMIs is fundamental to planning your repayment simply because you need to consider your debt-to-income ratio. If your debt payments are a sizeable chunk of your income, you’re going to have to make compromises in other areas of your life and this will leave you vulnerable in times of emergency.
Committing a significant percentage of your income into debt repayments will take away from your emergency fund and this is a dangerous spot you must never reach financially. When planning your repayment, use the EMI calculator to keep you debt-to-income ratio under 25%.
Gain Insight into the Components That Make up Your EMIs
When it comes to your EMIs, it is important to know what part of it contributes to the interest and principal repayment. While you will have to discuss the details of your EMI breakup with your lender, the EMI calculator will also offer some valuable insight.
When you enter the values for computation, the calculator returns 3 results; they are total interest payable, total loan payment and the EMIs payable. Using this result if you divide the total yearly interest payable by 12, you will gauge your monthly interest contribution. This you can subtract from the EMI amount to understand the amount you contribute towards principal repayment each month.
An important element to borrowing is repayment, and the EMI calculator is a powerful tool that helps you plan that process. Ensure you use the calculator before you apply. This way you will have a fair knowledge and clarity about the loan you are applying for.