How to calculate your Home Loan EMI

A big part of getting a home loan is the EMIs that you have to pay for years and years afterwards. Equated Monthly Installment, also known as EMI is the part payment that you have to make to your lender bank every month. Your EMI consists of a part of the principal amount, plus the agreed rate of interest on your loan. The bank gives you a statement, stating the amount to be paid as your EMI; a lot of people do not know how to calculate EMI on their loans. There is no special home loan EMI calculator that tells you how much you have to pay every month. As a result they often feel that their banks are overcharging them.

If you’re one of those people then don’t worry, we’re here to tell you how to calculate your EMI with ease. Let’s take the example of Mr.X, who took a house loan for Rs. 5 lacs for a period of ten years, at the rate of 10.5%. He pays a monthly EMI of Rs 6,747. The bank calculates this EMI for him, and he feels he’s cheated. Here is an easy way for Mr.X to calculate his EMI.

The easiest way is to use a mathematical formula that has been derived to calculate EMIs. The formula reads, EMI = [P x R x (1+R)^N]/[(1+R)^N-1]. The P stands for the principal amount of your loan, R is the interest rate per month and N is the number of monthly installments to be paid.

Another way to calculate home loan EMI is with the help of Microsoft Excel Sheets. The formula used here is called the PMT. For this formula you need three variables, the rate of interest, the number of periods (nper) and the value of the loan. This formula is used universally for this purpose and when in doubt you can use it to calculate your own EMI. There isn’t any scope for error since it’s all done by a computer, which acts as your home loan EMI calculator.

So the next time you have to make an EMI payment, just use these formulas and you should be sorted.  

Fixed Interest Rates v/s Floating Interest Rates

Buying a new home can be a tedious process. You have to first select your dream home, put your finances in order, and then approach a bank or NBFC for a housing loan. If you’re lucky and your CIBIL score is good enough your loan can get sanctioned within days, but before that happens you need to agree upon an interest rate for your loan. Home loan interest rates are of two types, fixed rates and floating rates. Since home loan is usually a long term commitment, choosing between fixed and floating interest rates is usually a tough decision for most applicants.

Let us simplify this process for you, by explaining what both these interest rates actually mean and what they entail.

Banks and non banking financial companies offer both fixed and floating interest rates. Since interest rates are the most important aspect of any loan, getting it right is the key to repay without any financial stress or default over time.

Fixed rate of interest on a loan would mean that the equated monthly instalments or EMIs would remain constant over the tenure of the loan. On the other hand for floating interest rates, the EMIs would fluctuate as per the market dynamics as interest rate increases or decreases.

Fixed interest rates are always set higher than floating interest rates, by 1 to 2.5% at the time of the sanction of the loan. This is can be both and advantage and a disadvantage. Since these rates remain constant you don’t have to worry if there is a hike in the housing loan interest rates due to the passing of a bill or implementation of a new rule, but at the same time if the rates see a dip, there is no benefit to you.

Floating interest rates are usually lower than fixed interest rates although parameters like inflation and current account deficit are used in calculation of base rate by RBI which can mean an uncertainty and different EMI for each repayment or installment for the home loan. This can be difficult to keep track of as each installment may be different.

Both these rates have their own advantages and disadvantages.  Before choosing one, a borrower needs to do proper research as to which one best suits him. 

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Is this the right time to transfer your Home Loan?

With the huge amounts of funds deposited into banks during demonetization in India, banks have reduced their home loan interest rates a great deal. A number of banks have reduced their housing loan interest rates by 50 basis points making their current rate is 8.5 per cent. Following SBI other banks and NBFCs too have reduced their rates, one whom has reduced its housing loan interest rates by 45 basis points. These rate cuts will mainly benefit new borrowers. But this doesn’t mean that existing borrowers cannot benefit from these reduced rates at all.

If you currently have a home loan and are thinking of transferring, you loan due to lower interest rates at another provider this just might be the right time to do so. Here are some factors you can consider that would help you decide whether you should opt for a home loan balance transfer now:

1.      Savings is the main reason for transferring home loans. But make sure that you opt for a home loan balance transfer only if the total savings in interest payout is substantially higher than the cost incurred while transferring the loan. Usually, the new lender will charge various fees, such as conversion fee, processing fees and administrative charges during the loan transfer.

2.      Transferring your home loan to a new lender is similar to availing a fresh loan, where the new lender will have its own set of terms and conditions. You can use it to re-set your loan EMI and tenure and top up as well. Opt for a home loan transfer if your existing lender is not allowing you to reset the terms and conditions of your loan.

3.      Usually banks and NBFCs provide top up loans to existing borrowers. These are just like personal loans but their interest rates are lower than a separate personal loan. One may require a top up in case of funds required for an emergency or in case of a home loan for renovations. Transfer your loan only if your current provider is not allowing you a top or if the new provider is offering you a better rate.

Transferring home loan to a new lender helps one to reap benefits of a fresh loan in itself. Having a better rate of interest is beneficial in the long run and if need be one can always opt in for better rate provided by banks, NBFCs or other financing institutions. Click here to know more about home loan interest rates.

Why Home Loan Application get Rejected

While preparing your home loan application you think about everything. You do your research; you check your credit score, the documents required for home loan. But do you think about why, despite doing all the necessary things, your loan application might still get rejected?

With the disposable income of the working class increasing day by day and property providing a great investment opportunity, the number of people applying for home loans is ever increasing. The A lot of times, despite being in a good credit space, having a good stable monthly income and doing everything else right, your home loan application may still get rejected. 

Here are a few uncommon reasons why that might happen:

1.    Builders today, have tie ups with banks. If the builder you’re seeking a property from, is not in a tie up with your bank or isn’t approved by your bank, your loan may get rejected. It’s a good idea to check with your builder about which banks he has got approvals from.

2.    A builder may figure in a bank's list of approved builders, but a specific project launched by him may not have been approved by the concerned bank. In addition, there are likely to be cases where particular phases of a project may not have bank approval. So before applying for your home loan it’s extremely important to check with your builder about all these approvals.

3.    In the case of resale property, if the buyer and seller mutually decide on a price for a property and the buyer seeks a loan, the bank or loan provider re-evaluate the price of the property and if the value is lower than the price decided by the buyer and seller, the loan stands a chance to be rejected.

4.   Defaulters are blacklisted along with their properties by banks and housing finance providers. If you happen to live in a house that has been blacklisted your application may be rejected.

5.      Your job stability is extremely important when you apply for a loan. Some banks even insist that you need to be employed with a concern for at least three years to be eligible for a loan.

Learn the many benefits of purchasing a property

Property investments are one of the most lucrative financial assets owned by an individual. It is also the largest or the major component of financial investment in one’s entire lifetime. If you have already purchased a home loan or am planning to invest in one, then read along these basic guidelines for a clear insight into property investments and house loans specifically.

Credit Score: Banks pull a substantial amount of finance when lending loan amount to the lender. Hence, it is important for the individual to own a good credit score to claim the loan without any hassle.

Mortgage Amount: Before applying for a home loan for a specific property is to look out for home loan eligibility by checking your eligibility using a home loan emi calculator. Understand your debt-to-income ratio. It is advised to have a debt-to-income ratio below the 50% mark to have your loan approved without any delay or disapproval.

Funding your dream home in the right way: If you intend to live at your home for 5 years or more then the safest and best considered bet is to apply for a 30-year fixed rate mortgage

Second Mortgage Options: A second mortgage lets you borrow against the value of your home. It is best advised to consult a financial advisor before taking any financial decision to help save finances in a smart way.

For those with low down payment finances: It’s possible to claim mortgage without the 10-20% down payment mark. Again, seek financial advice for your home loan and get familiar with these mortgage programs that lets you take mortgage on very little down payment

It's possible to get a mortgage without a 10%-20% down payment. Even today, people get a mortgage with no money down. There are a few legitimate programs allowing you to get a mortgage with very little down. Get acquainted with some of the safer mortgage programs out there.

Apart from these, it is advised to not quit your job and have a steady income. Make sure you have enough funds to pay your monthly basic expenditures and debts as you loan them. Pay your bills on time. Keep bank accounts in handy. Before applying for a home loan, compare different banking institutes and their terms and conditions levied while applying for a home loan to get better financial benefits. Make use of a home loan emi calculator to learn about your monthly EMI for the property you wish to buy.

Here’s how you need to use a Housing Loan Emi Calculator

As an individual, it is crucial to plan ahead of the future. Financial planning is one such major aspect to be considered while looking out for financial investments and expenses. If you intend to buy a home, looking for the right interest rates and EMI options is a must. Online policy comparers offer a quick and easy Home loan EMI Calculator that helps individual understand their eligibility before applying at any loan or finance institution.

Here’s our quick 6 step guide to attain financial security while carefully cross checking our quick and easy financial checklist stated below:

1. Monthly Expenses:

Having to buy a home in India calls for an extreme financial stretch considering the steady rise of properties in the region. As an individual, it is important to have a fixed amount saved for future financial deficits. One needs to take care of their monthly expenses by minimizing monthly household expenses by 25-40% the least when they apply for a house loan. Click here to know: How to apply for home loans in India.

2. Understanding the concept of loan amount:

Currently, banks offer 80% of property value as a loan amount. It is important to consider that the rest 20% of the property value relies on us individually. This amount cannot be raised through loan or debts. Most financial advisors suggest a contribution of 40% down payment from savings to reduce the financial burden. Stamp Duty and other registration costs accounts up to 5 - 10 % of total cost for house loans.

3. Existing loans and debts:

The liability of home loan is magnanimous compared to another kind of loan amount. Hence, it is advised to clear off all other existing debts and loans including personal loan, education loan, car loan (as applicable). This not only helps you take financial decisions better for your home loans but also improves your CIBIL Score. Check your eligibility stats with easy and quick online tools like home loan emi calculator to understand the risk factors associated with applying for a home loan.

4. A steady source of income:

Financial planning can go haywire if there is a constant absence of regular income. If you work for a sector hit by recession recently, it is best advised to postpone any kind of financial purchase that requires a steady job or job stability.

5. Financial Reserve:

In an unfortunate event, where you need to be able to cash in funds, it is best advised to have an emergency fund with minimum 6 months of household expense handy. These deposits can be lucrative for short term investments like Bank FDs, Mutual Funds and others of similar liking.

These 5 steps are the most basic yet effective ways to plan your finances wisely while carefully choosing the right house loan online. Remember to look out for housing loan EMI calculator prior to applying for the same.

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Home Loan Eligibility Criteria for Self Employed Applicant

Planning to buy a property? With several financial companies offering attractive home loan options, it is more convenient in realising your dreams to buy and own a property.

The home loan process has been made far simpler and accessible thanks to a number of provisions that are offered by most of these competent institutions. You can complete several formalities online without the hassle of wasting your time or spending extra money.

Even if you not well versed with the way this business works or are completely new to the process of home loans, internet makes it far easier and within your grasp to understand the nuances involved. The company websites provides an in-depth understanding of the services that are being provided. A feature called the home loan eligibility calculator will help you find out whether or not you are eligible to avail loan of a certain amount. It will calculate your EMI, give you an idea of tenure and basically several resources for you to complete your initial R&D. Other than this, you can find real reviews from people who have used services to so you get an idea whether or not to approach such company.

You can take help from financial advisors to understand the process and get assistance every step of the way.  Some of the eligibility criteria include your age, educational qualification, credit history, existing loans, and more. One of the important criteria is whether not you are a salaried or self-employed individual.

If you are a self-employed individual, the process may get a little tedious compared to salaried individuals. Some important things to keep in mind are these:

A detailed statement of the profit or loss you make needs to be submitted. This is one of the crucial steps.  In the case of a salaried candidate, bank statements are completely trusted which also makes the process far convenient.

IT verifications might prove to be stringent. The company may check your IT returns from the past two years or more. A good IT return will surely reflect and prove to be a good basis for approval.

The home loan eligibility may differ from one company to another. You need to be prepared for verifications and evaluations.

A good credit card score, a bigger bank balance will surely help you get the approval on a fast-track.  Make a thorough research, improve your credit score, try paying a higher down payment.