Buying a home is a dream for many. If you, too, have this dream, a home loan can help you fulfil it. Luxury apartments in Mumbai can be expensive. Thankfully, financial planning with a home loan can simplify the purchase process and enable you to experience the comfort and luxury of a spacious home. However, it is essential to understand how the EMI (Equated Monthly Instalment) of your loan is calculated, so you can plan your repayments efficiently. While a home loan EMI calculator can help you in this regard, here are some more things you should know.
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What Factors Affect Home loan EMIs?
A number of factors influence the EMI for a home loan, such as:
- Interest rates: The higher the interest rate, the higher would be the cost of each EMI. Besides, the type of interest rate can also impact the EMI. For instance, floating rates keep fluctuating during the tenure, whereas fixed rates stay the same for the entire loan term.
- Loan value:A high loan value can result in high EMIs, increasing the total amount owed. If you pick luxury apartments in Mumbai on the higher end of the price spectrum, your EMIs may be relatively higher in value, depending on the cost of the house.
However, saving up for the down payment and applying for a smaller loan value can help you lower the EMIs.
- Tenure:A long term can lead to more interest payments, thereby increasing the cost of the loan and the subsequent EMI. On the other hand, fewer EMIs may increase the cost of each EMI as the entire amount would be broken down into fewer instalments. To find out how this works, you can make use of a home loan EMI calculator.
- Credit score:The credit score determines the interest rate, which in turn affects the EMI. If you have a favourable credit score, you can get a low-interest home loan and eventually pay lower EMIs. However, if you have a low credit score, you may find it hard to find a low-interest loan and would have to pay higher EMIs.
- Loan prepayment:Prepayment allows you to settle the home loan prematurely before the tenure. This can be a good way to reduce the EMIs and repay the debt sooner if you have surplus funds. However, some lenders charge a prepayment fee. You can find out the exact costs after having a talk with your loan provider.
- Location and type of the house: New luxury apartments in Mumbaimay help you get a lower interest rate, as these houses have a better resale value than old constructions. The house’s location and type influence the lender’s decision to a great degree. Smart homes, reputable residential complexes, and posh localities always have enough buyers.
As a result, lenders are willing to offer lower interest rates on such luxury apartments in Mumbai. On the other hand, an old house in a small locality may not have a great resale value. These things ultimately impact the EMI for the loan.
How to Calculate Home Loan EMI?
Calculating the home loan EMI can be tricky as various variables are at play. However, you can use the following formula:
P x R x (1+R)^N / [(1+R)^N-1]
Here,
- P is the principal loan amount.
- N is the loan tenure. This is calculated in months.
- R is the monthly rate of interest charged on the loan.
If you find this confusing and need better accuracy, you can also use a home loan EMI calculator. A home loan EMI calculator is an online tool that helps you understand the EMI for your loan. It is quick to use and only requires a stable internet connection. Moreover, it is free and can be used multiple times. So, you can use it with different permutations and combinations and accordingly plan your loan.
To Sum it up
Using a home loan EMI calculator can offer you clarity and help you plan your budget better. It gives you a glimpse into the affordability of the house and eliminates doubts or miscalculations. Having said that, there could be other factors at play, too. So, it may be advised to have a straightforward chat with the loan provider to know more about how your loan’s EMI is calculated.