- Offers Breakup of Various Finance Charges:ÂÂ Using the home loan calculator also helps in understanding various financial charges such as total interest paid & processing fee value. Since banks and financial institutes present them as a percentage of the principal amount, knowing the actual value helps immensely in deciding the terms of the loan.
- Comparing Loan Offers: You can use the home loan calculator to compare the financials involved in loan offers from various banks. Provide the required inputs on the basis of offer made from different banks, get the results, jot them down and compare. You can decide to sign up for the most feasible one which offers the lowest rates and charges.
- Helps in Choosing the Loan Terms: Knowing the EMI value also helps in choosing the terms of the loan such as tenure of the loan. If a shorter term means a higher EMI, you can try various combinations of available tenures and work out suitable terms that match your monthly income and budget.
- Helps in Loan Management: If you’re in the middle of repaying a housing loan and would like to revisit the financials with a specific motive such as paying off the loan before the term ends, using the home loan EMI calculator helps in making decisions in this regard.
- Helps in Validating Information: (Cross-Check Amortisation Schedule) If you are negotiating a home loan deal with the bank, you can cross verify the schedule provided by the bank by using the home loan EMI calculator to get the amortization table details. If the numbers mismatch, you can contact the bank and get them clarified.
- Saves Lots of Time: With an online home loan EMI calculator, you don’t have to waste time performing manual computation. Manual calculation can take time and be difficult to see through till the end. Human error is another disadvantage of manual computation of the EMI on your home loan.
- Easy Process: You only have to enter the loan amount, interest rate, and loan tenure in the tool, the actual computation will be taken care of by the home loan EMI calculator.
While computing the Home loan EMI, taking inflationary and deflationary scenarios of floating interest rate into account, you will be better prepared to meet the outcome. Depending on the EMI, you can opt for prepayment of your home loan.
5 Factors that Affect your Home Loan EMI
- Loan Amount: The principal is the loan amount borrowed from the bank. It is used to determine the total cost of the loan. Higher the loan amount, higher the EMI.
- Interest Rate: The interest rate for home loans differ from bank to bank. Higher the interest rate, higher the EMI. It is advisable to do some research and choose a bank that offers the lowest interest rate. Lower the interest rate, lower the cost of your home loan.
- Loan Tenure: The time taken to repay the loan amount is called loan tenure. Longer the loan tenure, lower the EMI. Loan tenure is determined based on your age at the time of borrowing and your retirement age. In India, the longest loan tenure available across banks is 30 years.
- Processing Fee: This value, assigned in terms of the percentage of loan amount, is the agreed upon processing fee applicable to the loan product. If you aren’t sure about this value, kindly consult your loan related documents or consult the appropriate resource at your loan lender.
- Pre payments: Usually, many home loan subscribers prefer to make pre-payments on their loan. Make your choice by opting for the yes/no toggle that is provided as the final input in the tool.
How Does Home Loan EMI Payment get you Tax Benefits?
Paying EMIs every month can be hard on your bank account. You have to prepare a monthly budget to save money after paying your bills, EMIs, and meeting any unexpected financial requirements. Fortunately, the government of India offers tax benefits to Indian nationals on home loan repayments to incentivise home loans. The following are the various tax benefits you can get with regards to home loan repayments:
- Under Section 80C of the Income Tax Act, 1961, you can avail tax deduction of up to Rs.1.5 lakhs per financial year towards the principal repayments made on your home loan.
- Under Section 24 of the Income Tax Act, 1961, you can avail tax deduction of up to Rs.2 lakhs per financial year towards the interest payment on your home loan.
- Under Section 80C of the Income Tax Act, 1961, you can avail tax deduction on stamp duty charges and registration charges.
- Under Section 24 of the Income Tax Act, 1961, you can avail tax deduction on processing fees, prepayment charges, and service fees.
Tax deduction is applicable only if the home loan is used to purchase or construct a home. You can claim tax benefits only when the construction is completed or you have taken possession of the home. There is no tax benefit for property under construction. Tax deduction is not applicable to a home loan taken for repair, reconstruction or renovation.
What is the Impact of Part Payments on EMI?
If you have a lump sum amount of money, you can use it to make part payment on your home loan. Part payment made towards principal repayment can bring down your EMI or reduce your loan tenure. Lower EMI means that you can save on interest payments. For part payments to make that much of an impact on your EMI, the part payment has to be significantly large. You make more than one part payment. However, not all banks allow part payments.
Is the Home Loan EMI Fixed or Can It Change in Future?
Home loan EMI is fixed but there are certain circumstances under which it can change such as:
- Rise in Floating Rate of Interest on Your Home Loan: Whenever the RBI announces repo cuts and there is a change in the floating rate of interest, the bank will increase the loan tenure while keeping the EMI same. If the new loan tenure exceeds the permissible number, then the bank may increase your EMI amount.
- Flexible EMIs: If you have opted for flexible EMIs such as step-up or step-down EMIs, then there will be a change in your home loan EMI over the loan tenure. In the case of step-up EMI, your home loan EMI will increase with each repayment. In the case of step-down EMI, your home loan EMI will decrease with each repayment.
- Partly Disbursed Loan: In the case of partly disbursed loans, the EMI is bound to increase with each disbursement.
- Loan Prepayment: If you decide to prepay your loan, the outstanding balance will reduce and so will your EMI. You can either choose to reduce the EMI for the same loan tenure or reduce the loan tenure while keeping the EMI same. However, the latter is found to be beneficial.