Make your Financial Planning Easy with Home Loan Calculator

Buying your first house can be an overwhelming experience. It takes a lot of time and effort to narrow down on the right house, and you can eventually call home.

The hardest part is where you need to negotiate the right prices with the builder and broker so that you get the best deal for your hard-earned rupee. Finally, when you have worked out all the logistics, you need to apply for a loan to fund your new purchase. However, before you take the all-important step of purchasing your first home and subsequently a Home Loan, you need to assess certain factors. You need to evaluate affordability as well as the future serviceability of the loan.

While there are several loan offerings available from financiers such as SBI Home Loan, you also need to be wary of not falling into a debt trap. The debt burden has caused a lot of financial headaches for aspiring homebuyers– especially those who didn’t bother doing research into analyzing their financial ability of being able to afford loan EMIs (equated monthly installments) in the long run.

While buying a Home Can be a gratifying experience for most of us, it’s also undoubtedly one of the biggest purchases we can make. Make no mistake; there is no shame in looking for a bit of assistance when dealing with financial issues.

Home Loan Calculator

Buying a house is, without a doubt, a long-term financial commitment while easily ranking as one of the biggest decisions you will make in your life– financial or otherwise. This is why you need to be absolutely thorough and clear with your financial situation. Further, you need to ask yourself whether you’ll be able to afford the loan or not as part of your income will be blocked to service the Home Loan EMI for a good portion of the time.

A Home Loan EMI Calculator is an online tool which can make the process of calculating your Home Loan EMI a whole lot easier and hassle-free. While there are manual formulas for calculating the EMI amount, not only this is a time-consuming process but it is also prone to several human errors.

Here are a few benefits of using a Home Loan calculator:

1. Convenience — One of the biggest benefits of using a Home Loan Calculator is the convenience it bestows upon the user. Calculations made with a pen or paper can open you to several errors while being incredibly tedious as well. EMI calculators take the manual work out of the equation and help you estimate your own borrowing capacity quickly.

2. Accuracy — A Home Loan EMI calculator can help in forecasting your EMIs in an instant and with a lot more accuracy. Numbers churned out by a Home Loan Calculator is as accurate as it can get and helps in taking any sort of guesswork out of the equation. Moreover, it can help you determine your interest and principal outgo over the course of your loan tenure and thereon give you an accurate assessment of how much money needs to be set aside every month towards fulfilling your dream.

3. Budget planning– It pays to remember the old adage “A penny saved is a penny earned.” Besides servicing the Home Loan EMI, you should ensure that you have enough savings left to invest for other goals and expenses. In that regard, Home Loan calculators assist in planning your monthly expenses efficiently which, in turn, will help you in establishing whether your budget permits you to purchase a house. In that light, it can help you in making informed decisions by helping you determine whether you can afford a particular house or if you should instead look at another property which fits within your budget. This way, Home Loan Calculators can enable you to understand how much you will need to save to get there.

4. Helps in choosing the right tenure– Using a Home Loan Calculator can help you in ascertaining the desired loan term for which you wish to avail the Home Loan. If you can afford to pay higher EMIs, you can opt for a shorter tenure and, in turn, get a visual breakdown of how much you will end up paying in interest and principal over the tenure. While a longer loan tenure (up to a maximum period of 30 years) can help in reducing the EMI outgo every month, you will end up paying an excessive amount by way of interest. On the other hand, a shorter tenure will result in higher EMIs but will result in you paying lower amounts by way of interest payments over the term.

For instance, if you were to avail Rs. 25,00,00 loan at an interest rate of 8.55 percent over a period of 10 years, you would end up paying a total of Rs.37,27,597 (25,00,000 principal + 12,27,597 interest). Similarly, if you were to avail the same loan at the same interest rate of 8.55 percent over a period of 5 years instead, you would end up paying a total of Rs.30,81,097 (25,00,000 principal + 5,81,097 interest). In this scenario, by reducing your tenure by 5 years, you can effectively end up saving nearly Rs. 6,46,500 in additional interest payments. Hence, Home Loan Calculators make it easier to pick and choose terms which work best in your case.

5. Choosing the Right Lender

Home Loan Calculators can also be used as comparison tools to help evaluate which lender offers the best terms that complement your financial capabilities. Say, for example, Bank A is offering a Rs. 25,00,000 loan at 9 percent interest for 8 years while Bank B is offering the same amount, for the same period at 8.75 percent. While on the surface, the difference between the two might only be 25 basis points, by using a loan calculator, you would be able to analyse the impact further. Bank A’s offering, for instance, would result in you ending up paying a total of Rs. 35,16,049 which includes Rs. 10,16,049 by way of interest. On the other hand, Bank B’s offering would result in a total outgo to the tune of Rs. 34,85,001 including Rs. 9,85,001 towards interest. Thus by choosing Bank B over Bank A, you would have saved Rs 31,048.

Visual Representations– Most online Home Loan Calculators provide all relevant information related to your loan, such as your principal amount, interest payment, total amount payable in an easy-to-understand graphical presentation. Additionally, you get access to an amortization schedule/ table which will give you a detailed breakdown of the monthly and yearly amortization schedule thus enabling you to better understand how your loan will progress over time.

The Bottom Line

As you can see, a Home Loan Calculator is more than just a basic calculator. When planning to purchase a house, it can prove to be your best friend and help you determine your borrowing capacity without having to compromise on your other goals. Always keep in mind, the secret to leading a disciplined financial life lies in efficient financial planning