Buying a house in today’s times is no easy feat. Most people rely on home loans to purchase houses, without which this might seem like an impossible dream. Now, a housing loan provides the financial assistance required to cover the value of a property. However, applying for a housing loan is a big decision. It is most probably going to be the most significant loan of your life, which is why ensuring that its repayment would not be a problem is vital.
But how does a borrower check whether they can afford a home loan? Many borrowers have struggled with clearing their EMIs, and since this is a long-term loan, it is essential to check your home loan affordability. There are two ways to do this. One is the complicated way in which you have to calculate the monthly installments of the home loan manually. The second is to make use of a home loan affordability calculator, which is an online tool that displays EMI results of housing loans. The latter is a safer option to go for and a more efficient one.
For this calculator to display the home loan EMIs, you will have to fill in the information in 3 of its fields:
1. Principal amount
The principal amount is the amount that you want to borrow from a lender to purchase a house. Now, this loan amount will only get sanctioned once the financial institution verifies numerous factors such as your income, age, CIBIL record, financial documents, etc. If everything is in order, the lender will approve the required loan amount, which is the principal amount of the loan. Before you apply for a home loan, it is advisable to make use of a home loan calculator, which will help in understanding the affordable loan amount.
2. Interest rate
The home loan interest rate will depend upon the lender and the borrower’s profile. This is an area that needs a lot of focus on while getting a loan, as any difference in the interest rate of a loan can have a significant influence on the monthly installments. Using the EMI calculator will help you understand whether to accept the current interest rate offered by a financial institution or keep looking for a better plan.
3. Repayment tenure
Lenders can offer repayment tenures of up to 20 years for housing loans. Choosing a long-term will help keep the EMI payments smaller, but repaying the loan in a short assignment will help save interest. Choose a repayment tenure that suits your budget based on existing debt obligations.
The best part about using this calculator is that it is free of cost. Many reputed lenders make this calculator accessible on their websites for people to use before applying for loans. Try out different variations by changing the principal amount and repayment tenure. This will help you understand whether a housing loan plan is affordable or not.