It is one thing to aspire for a dream but another to make it a reality. Buying a home is that. While many of us aspire to own our homes, very few turn it into a reality.
One of the most important aspects of home-buying is to find the finances to fund your home purchase. If you cannot fund it with your own financial resources you can always look up to Tata Capital who can extend a housing loan to you. Thus, a home loan becomes a vital funding resource and as such you have to pay careful attention to the various aspects associated with it.
Know your EMI
Although a housing loan gives you the funds to help you acquire your new home, it is a reality that you must repay the home loan amount you have borrowed along with the interest charged on the loan. In order to help you repay the loan conveniently, your repayment is in the form of equated monthly installment (EMI). EMI is a constant monthly amount you pay till the home loan amount along with interest is repaid in full.
EMI is dependent on three variables – home loan amount, interest rate and tenure. Any change in any of the variables changes the EMI amount. While EMI is directly proportional to the home loan amount and interest rate, the tenure affects EMI inversely. This means that higher the loan amount and/or the interest rate the EMI is higher. If the tenure is higher, the EMI is lower. Typically, the interest rate is applied on a reducing balance method which means that the interest is charged on the outstanding principal amount after deducting a portion of the EMI towards principal repayment.
The equation governing the calculation of EMI is
P × r × (1 + r) n/ ((1 + r) n – 1), where
P is principal, r is rate of interest and n is the tenure in number of years.
As you can see for yourself, the formula is quite complicated and difficult to perform manually. This is where the power of technology steps in to help you, the borrower. A software program takes care of the calculations through a home loan EMI calculator and you can input different values of P, r and n into the home loan EMI calculator and obtain the EMI instantaneously.
Let’s illustrate with examples how the home loan EMI calculator can help you. You can use the Home Loan EMI calculator available on the Tata Capital website here.
If loan amount is Rs 52,60,000, interest rate is 10.5% and tenure is 240 months, the EMI is Rs 52, 515.
Without changing principal and tenure if you decrease the interest rate to 9.5%, the EMI becomes Rs 49,030, and if you increase the interest rate to 11.5%, the EMI becomes Rs 56,094.
On the other hand, without changing principal and interest rate, if you increase the tenure to 360 months, the EMI becomes R 48,115, and if you decrease the tenure to 180 month, the EMI becomes Rs 58,011.
Thus, you can see the effect of changes in EMI when you change parameters that affect calculation of EMI.
You can use the home loan EMI calculator to determine the EMI for different values of principal, interest rate and tenure. By doing this you can arrive at an EMI that you would be comfortable with subject to meeting the conditions set by Tata Capital. Now, are you ready to apply for the home loan? You can apply here.