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 biggest 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 important to check your home loan affordability. There are two ways to do this. One is the complicated way in which you have to manually calculate the monthly instalments of the home loan. The second is to simply make use of a home loan affordability calculator, which is an online tool that displays EMI results of housing loans. Needless to say, the latter is not only a safer option to go for, but also a more efficient one.
For this calculator to display the home loan EMIs, you will have to fill in information in 3 of its fields:
1. Principal amount
The principal amount is the amount that you want to borrow from a lender in order 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 home loan, it is advisable to make use of a home loan calculator, which will help in understanding the loan amount that is affordable.
2. Interest rate
The home loan interest rate will depend upon the lender as well as 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 instalments. Using the EMI calculator will help you understand whether to accept the current interest rate being offered by a financial institution or to keep looking for a better plan.
3. Repayment tenure
Lenders can offer repayment tenures of up to 20 years when it comes to housing loans. Choosing a long tenure will help in keeping the EMI payments smaller but repaying the loan in a short tenure will help in saving 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 they apply for loans. Try out different variations by making changes in the principal amount and repayment tenure. This will help you understand whether a housing loan plan is affordable or not.