The home loan amount that you can afford is majorly determined by the EMI (equated monthly instalment) amount that you can pay. The home loan EMI amount must not just be computed while availing a fresh loan, but also when switching or transferring the loan to another home loan lender.
Here is how you can compute your home loan EMI:
Determine the loan amount
To get an idea about your home loan eligibility, begin with your overall annual income. You typically can avail a home loan of around five times your annual income. This multiple might differ from lender to lender and depend on numerous other parameters like overall repayment capacity and nature of profession.
Additionally, your loan amount even depends on the property value. The maximum loan amount offered by lenders can be up to 75 – 90 % of the property value. Though the ultimate loan amount will depend on parameters like property value, rate of interest and loan repayment tenure, you can begin with an estimated loan amount.
Find the correct loan repayment tenure
Generally, a home loan is a long-term loan, wherein few lenders may offer a tenure of up to 20-30 years. Ensure to note that a higher home loan tenure means involvement of higher interest amount. Usually, lenders permit a repayment tenure where the loan repayment must be done by the time you approach the age of 60. Therefore, if you already are 40 years old then you can avail a tenure of 20 years, however, if you are 50 years, you can avail a maximum repayment tenure of 10 years.
Typical limit applied by lenders on EMI amount calculation is that your overall EMI of all existing loans together must not exceed 50 percent of your monthly income. However, if your EMI for the desired loan amount is over this limit, lenders either may reduce your loan amount or enhance the tenure if you are eligible for a higher repayment tenure.
Know the best rate of interest
While all the home loan seekers would want to avail the lowest home loan interest rate, this may not be possible on account of various factors. Every lender has certain housing loan eligibility rules as per the property kind, and the borrower segment it can lend to. For example, many lenders may offer best rates to salaried individuals while others may offer lower rates to those with a higher credit score of 750 and above. In addition, many female loan seekers are provided a special rate by lenders to encourage more females to become financially prudent and responsible.
How can you compute your EMI using the home loan eligibility calculator?
Various online home loan eligibility calculators can assist you to easily compute your EMI. Such calculators can be found on the lenders’ website and aggregator portals. Once you are aware about the above three factors namely the principal loan amount, loan tenure and interest rate – you can input them on their respective slots on the calculator. Note that you even can use the slider for adjusting the figures based upon your repayment capacity.
Once you have entered the 3 important values, the home loan eligibility calculator will automatically show the EMI amount in seconds. Additionally, remember you can keep adjusting and changing the values, and the EMI calculator will display accurate and instant results, thus helping you customize your loan depending upon your comfort. Thus, once you derive the final EMI through the calculator, you can proceed to apply for home loan with the selected lender.