A home loan is a high-value credit which can become a financial commitment for borrowers for up to two decades. Therefore, they can use a free online tool called the home loan EMI calculator to assist in better understanding the nature of the EMIs payable. Therefore, before applying for a home loan, individuals should learn how to calculate home loan EMI using it.
How to use the home loan calculator?
Depending on the type of calculator offered on the lender’s website, borrowers can either enter the numbers directly into the calculator or use the slider to change the values for the principal loan amount (P), tenor (N), and interest rate (R).
Apart from using the EMI calculator for a home loan, individuals can also do the calculations manually or on Microsoft Excel sheets. However, those can be time-consuming and can lead to factual errors. Thus, one should use these free and easily accessible tools to compute the monthly EMIs within a few seconds.
What is the formula for home loan EMI calculation?
The formula that the digital tool uses to calculate home loan EMI is as follows:
EMI = [P x R x (1+R)^N]/[(1+R)^(N-1)]
According to the formula,
EMI stands for equated monthly instalment, P is the amount the borrower took as a loan, R is the rate of interest, and N is the total number of monthly instalments the borrower has to pay. Additionally, borrowers should consult with a representative of the financial institutions to choose between floating and fixed interest rates.
How to calculate home loan eligibility?
While the home loan EMI calculator will help borrowers figure out how much each monthly instalment of their loan will cost, they should remember that calculating loan eligibility is as important as calculating the EMIs. To calculate eligibility, borrowers can use online home loan eligibility calculators. This would give them a fair idea of the loan amount they can get. However, the actual lending amount depends on various eligibility criteria that the borrower must meet.
What factors affect eligibility for home loans?
The factors that affect the eligibility for home loans are:
- Credit score
- Annual income
- Any existing debts
- Age
- Employment status
- Property details
There are a few factors that borrowers cannot change. However, since credit score is a crucial eligibility factor, they should try to improve the ones they can. They can try to repay their existing loans on time and maintain a stable income. Increasing the eligibility would mean a higher loan amount, and it would also let them negotiate for better offers.
Furthermore, loan applicants should be aware of the documents they need to apply for a home loan. Before applying the loan, they need to collect and gather the necessary documents to submit it along with the application form. Submission of correct documents leads to quick approval of loans.
What are the documents required to apply for home loan
The list of documents one needs is the following:
- Documents containing property details:
- Allotment letter, stamped sale agreement, sales deed
- NOC from the builder
- Construction cost estimates
- Land tax receipt and possession certificate
- Proof of identity which can include PAN, voter ID card or Aadhaar card
- Proof of address which can include electricity bill, telephone bill, water tax
These are a few common documents one needs to submit. However, there are specific documents required for salaried and self-employed applicants respectively. One must contact their lending institution for the updated list of documents.
Borrowers should also check their pre-approved offers on the websites of financial institutions by entering their names and contact numbers. These are offers extended by financial institutions for their customers and are available on several products including home loan and loans against property. These offers significantly speed up the application process and make it hassle-free.
A home loan is a serious financial commitment that an individual makes. Knowing how to calculate home loan EMI using online calculators will expedite the process and reduce the chances of being scammed by the lender. However, for an exact quote on the EMIs, borrowers will have to contact their lending institution.
