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Having a home of our own is a necessity today and it can be fulfilled easily by taking a home loan. But wait! Are you not aware of how to plan your home loan?
Don’t panic as you can easily calculate and plan the amount for your budget home through the Home Loan Calculator.
This guide will help you to simplify the complex calculation involved in home loan EMIs as well as amortization schedules.
Introduction
A home loan calculator is a useful tool that helps you understand and plan your EMI payments. Whether buying a new home or refinancing an existing one, this calculator can be your best friend in managing your finances effectively.
To calculate the home loan, you have to take into account essential details such as the loan amount, interest rate, and tenure. This calculator will determine how much you will need to pay each month towards your loan.
For instance, if you are planning to take out a home loan for Rs. 300000 at the rate of 6.5% for a time period of 20 years, your monthly EMI is going to be Rs. 22,367.
This calculation considers both the principal amount as well as the interest. With the adjustment of the loan amount, interest rate, and time period on the online home loan calculator, you can easily explore different scenarios and plan for a home loan that suits your budget and scenarios.
How Home Loan Calculator is different from other EMI calculators?
A home loan calculator is different from other EMI calculators because it is specifically designed for calculating the home loan amount. On the other hand, EMI calculators are more general and can be used for different types of loans such as personal loans or car loans.
If you are calculating through any online mode of calculator, then you might not find any difference between the calculators. However, they both usually hold some basic differences. Let’s have a quick look.
| Basis of Difference | Home Loan calculator | Other EMI Calculator |
| Purpose | Calculates EMIs for home loans only. | Calculates EMIs for various types of Loans. |
| Output | Provides detailed breakdown of home loan payments, which includes principal amount and interest components. | Offers a general estimate of EMI payments. |
| Input Parameters | Requires specific details like loan amount, interest rate, tenure, and any additional home loan charges | Needs Basic information such as loan amount, rate of interest, and time period. |
Typical Amortization Schedule of Home Loans
A typical amortization schedule for a home loan shows how each monthly payment is divided between paying off the principal and interest.
To have a clear understanding of the concept, let’s break it down by example. Let’s say you take a home loan of Rs. 30,00,000 at an interest rate of 6.5% for a tenure of 20 years.
By using the amortization calculator, you will find out that most of your monthly payment goes towards interest. For example, in the first month, with a 6.5% interest rate on a loan of Rs. 30,00,000, the interest for that month would be Rs. 16,250.
The remaining amount after paying the interest goes toward reducing the principal amount. In the first month, it might be around Rs. 6118. So, the outstanding loan balance at the end of the first month would be around Rs. 29,93,883.
As you continue making the monthly payments, the portion of interest decreases, and the portion of the principal amount increases. It means that with every payment your interest will get less and the more of your payment will be adjusted towards reducing the principal amount.
In the final months of the loan, only a small portion goes towards the interest. This process continues until you pay off the full loan amount in the timeframe of 20 years.
Impact of PrePayment on Home Loan
Prepayment on a home loan can have a significant positive impact on your financial situation. When you make prepayments, you are paying off a part of your loan before the scheduled tenure ends.
This reduces the outstanding principal amount, which further lowers the overall interest payable on the loan. As a result, you can have a sufficient amount of money in interest payments over the long term.
Another benefit of prepayment is that it shortens the loan tenure. This means you will have more financial freedom and can redirect the funds that you would have spent on higher EMIs.
Ultimately, making the repayments on your home loan is a smart move, further paving the way to significant savings and faster loan repayment.
Factors Affecting Your Home Loan EMI
Several factors influence your home loan EMI. It determines how much you pay each month towards your loan. Let’s have a look at these factors.
- Down Payment of Loan - A larger down payment reduces your loan amount, which further results in lower EMIs. So, it is crucial that you save enough down payment as it will help to reduce your monthly installments.
- Loan Amount - The higher the loan amount, the higher will be your EMI. So, focus on borrowing less amount as it will help you to keep your EMIs manageable.
- Interest Rate - Another significant factor is the interest rate. A higher rate of interest will lead to higher interest, and a lower rate will reduce the burden of EMI. So, check out all the best options around.
- Tenure - Longer loan tenure results in lower EMIs, but you end up paying more interest over time, Shorter tenure means higher EMIs but less overall interest paid.
- Prepayment - Paying early also affects the EMIs as it charges foreclosure amounts. But, it will also help in reducing the balance as well as lower the EMI and interest.
Final Note
A home loan calculator is an invaluable tool for anyone considering a home loan. It is also useful for those who have already taken the loan as it helps to make informed decisions about the mortgage, understand prepayments, and helps to plan your finances effectively.