EMI is an integral part of a home loan. Before opting for a home loan, it is imperative that you have an idea of the outgoing EMI. A home loan EMI calculator enables you to calculate your EMI well before the time of availing the loan and comes handy while planning your monthly budget. Outlined below are some of the myths related to the home loan EMI calculator along with the realities.
Home loan EMI calculator computes the exact loan amount
You do not get the actual EMI payable because there is a variable interest rate component that is attached to the principal amount . The interest rate varies depending upon the loan type i.e. fixed or floating. A fixed interest rate remains the same all along the loan tenure while a floating interest rate is subjected to factors such as a change in Government policy which influences the home loan market. Further, if you are eligible for the Government sponsored Pradhan Mantri Awas Yojana (PMAY), you can get interest rate subsidy on your home loan.
Calculating the home loan EMI is a tedious process
Your home loan EMI can be conveniently calculated using the following formula:
P x r x (1+ r) ^ n / ([(1 + r) ^ n] – 1)
(P = Principal i. e. the loan amount, r = rate of interest per month, n = tenure in months, ^ = ‘raised to’).
One is sure to get the loan after the EMI is calculated using the home loan EMI calculator
This is far from the truth. Getting a home loan depends on various factors, such as establishing the credibility of the builder, providing all the documents to avail the loan, age and income of the borrower, the permissible tenure etc.
Increase in the interest rate will increase the EMI
This may not be true. Banks usually tend to keep the EMI constant for the benefit of their customers by adjusting the loan tenure. The chances of increasing the loan tenure depends on the age of the borrower. The more the age, the lesser will be the chance to get the loan tenure extended.
Home loan EMI calculator is only a tool to know your EMI outgoings on a home loan. It is important that you approach a credible lender who adheres to transparent dealings so that you get the right deal and an exact picture of your financial commitment against your home loan. This will help you to fulfill the dream of owning a home with the help of a home loan without hassles.