Repayment of home loans is made easy with EMIs or Equated Monthly Installments. Home Loan EMI changes according to the loan principal and the repayment tenure, and are largely dependent on the financing sectors. In this article, we will give you a brief note on Home Loan EMI Calculator, eligibility criteria, and repayment procedure.
About Home Loan EMI Calculator
Every financial institution offers an EMI calculator in their official websites for individuals to have a clear: SBI Home Loan Calculator, HDFC Home Loan Calculator, and Axis Home Loan Calculator. Home loans are the amount of money borrowed by an individual from banks at a particular rate of interest. These loans are offered in case of -
- Purchasing a plot or a house
- Construction of a house
- Renovation and Extension of an old house.
- Home conversion
Repayment of the home loans with monthly installments is quite easy than paying a bulk amount at a time. Home loans are secured loans and the property papers are kept as security by financial companies while lending money. EMIs or Equated Monthly Installments include the loan amount and the interest charged on the amount. The entire sum is divided equally for regular monthly payment during the repayment tenure.
The benefits of using Home Loan EMI Calculator is -
- It helps to calculate the EMI that you need to pay against a loan amount for a selected repayment period.
- It helps in the decision making process. Suggests you the right tenure, looks into the interest rates, and the amount of loan you can borrow according to your income. Home Loan interest rate calculator is offered by several banks to show the various interest rates charged on home loans and compare between them.
- Housing loan EMI Calculator makes calculations simple with only three inputs.
- The results obtained are accurate and convenient in comparison to manual calculations.
- They are free to use and is available on the bank's website where you are applying for a home loan.
- One can access the Calculator from multiple devices at any-time and any location without any hassles.
The formula used in EMI calculators
If you are asking about how to calculate EMI on home loan, then I can suggest you two ways - manual calculations and EMI calculator. Manual calculations are time-consuming, error-prone, and not accurate in comparison to the EMI calculator.
How is EMI calculated on home loan? For this, you need to have three correct inputs -
- The principal loan amount (P).
- The rate of interest charged on the amount (R).
- The repayment tenure (N) or the number of Installments.
Now, EMI = [P×R×(1+R)^N]/[(1+R)^N-1]
Consider the following examples, to clearly understand how the EMIs are calculated depending on the rate of interest and repayment tenure over a borrowed loan amount.
What is the EMI of a home loan for 25 lakhs?
The EMI is calculated at 8% interest rate.
Suppose your repayment period is 5 years then you need to pay an EMI of rupees 50,700. If your repayment period is 10 years then your EMI is rupees 30,325. Similarly, for 15 years, 20 years, 25 years, and 30 years tenure the EMI keeps varying.
What is the EMI of a home loan for 20 lakhs?
The EMI is calculated at 8% interest rate and considering the tenure options, it keeps changing. For example, for 5 years tenure, you need to pay rupees 40,560 EMI per month and for 30 years tenure, you need to pay rupees 14,680 EMI per month.
What is the EMI of a home loan for 30 lakhs?
Considering the rate of interest as 6.95,the EMI for 10 years loan repayment period is Rs. 34,755. If your repayment period is for 30 years, then the EMIs become Rs. 19,858.
Home Loan Prepayment
This refers to early repayment of a large part of the loan amount to reduce either the EMI amount or the repayment tenure. When you have a huge corpus in hand but this is less than the amount borrowed, you can make pre-payment with that sum. This will reduce the loan amount. If you wish to continue for the same tenure as decided at the beginning then the EMI amounts will be reduced. But if you wish to repay the amount before the date of completion then you can keep the same EMI amount as decided. In both cases, it gives you a positive impact. To calculate both the cases, you can use an online tool called home loan prepayment calculator. In the Calculator, you need to provide four inputs -
- The loan amount
- The rate of interest
- The tenure
- The prepayment amount
After clicking on the 'Done' button, you can get the details regarding EMI saved and tenure saved. Always keep in mind that the prepayment amount must be at least three times more than the EMI amount you decided to pay at the initial state.
Home loan eligibility calculator
To apply for a home loan it is necessary to understand the eligibility so that he can repay the amount effortlessly. You can use the home loan eligibility calculator from the official website of the banks you are applying for. The eligibility criteria depends generally on two factors -
- The income of the borrower
- The age of the borrower
Both these factors determine the amount of loan you can apply for. The other factors are -
- Working Stability
- Debt to income ratio
- Property Details
- Amount of pre-payment
It is suggested to try paying higher down payments. This will lower the LTV ratio and improve the home loan eligibility. Besides that, add a co-applicant with a good income source, and improve your credit score if you have made previous financial errors.
Eligibility criteria -
- Both salaried and self-employed individuals can apply for home loans.
- Must have a good credit score. If your credit score is high, then your chances of loan approval become higher in comparison to lower scorers.
- The Fixed Obligation to Income Ratio must be below 40-50%. This ratio is calculated by taking your income and existing financial obligations.
- The age limit of the applicant must be within 18-70 years.
- The applicant with a regular income source is preferred over seasonal income applicants.
- Net monthly income should be 30,000 or above.
- The location and age of the property are also considered while loan approval.
- The working stability must be at least 2 years and for business, it is 3 years.
- The monthly EMI for salaried professionals is expected to be 40% of the monthly gross income.
- The profits earned by business professionals determine his eligibility for a home loan.
These criteria may vary for different financial sectors.
Documents required to apply for home loans.
The list of documents that are required to apply for a Housing loan is -
- A filled application form with valid pieces of information for applying for a home loan.
- Passport size photographs
- Proof of identification that may include a PAN card, Passport, Aadhar card, Voter ID card, or a driving license.
- Age Proof that includes Aadhar card, PAN card, Passport, Birth certificate, 10th class Mark sheet, Bank passbook, or Driving License.
- Residential Proof like a bank Passbook, Voter ID card, Ration card, Passport, or Utility bills.
- Income documents. For Salaried individuals - Form 16, certified letter from employer, past 2 months pay slip, an agreement or a promotion letter, and previous 3 years Income Tax returns.
For Self-employed, last 3 years ITR, Balance Sheet and profit & loss account statement of the business, business license or a professional license, registration certificate and proof of business address.
- Property documents.
- NOC or No Objection Certificate from the builder.
- Detailed estimation of the construction cost.
- Stamped agreement of Sale with the builder.
- Occupancy Certificate.
- Property Tax Receipts and utility bills.
- Advanced payment receipt
- Building plan copy.
- Originally land tax paid receipt and possession certificate.
- Payment receipts regarding payments made to the builder or seller.
Home loans under PMAY
Under PMAY or Pradhan Mantri Awas Yojana, the Economically Weaker Section EWS, Lower Income Group, Middle Income Group - I and II, are provided credit-linked subsidies on home loans by several financial bodies. The Government of India has decided to offer affordable housing units to the deprived section of the society. Priorities are provided to senior citizens, the transgender community, widows, and other minority classes.
The government will provide 6.5% subsidy to EWS and LIG under PMAY-G. The maximum dwelling unit is 30 sq.m for EWS and 60 sq.m for LIG with a maximum interest subsidy amount of Rs. 2.67 lakh. The maximum repayment tenure is extended up to 20 years. The discount rate for interest subsidy NPV is 9%.
Under PMAY-U, the government provides subsidies to MIG-I and MIG-II applicants. For MIG-I, the interest rate subsidy is 4% with the maximum dwelling area of 160 sq. meter. The maximum subsidy amount is Rs. 2.35 lakh. For MIG-II, the government subsidy is 3% with a maximum dwelling unit area of 200 sq.m. The maximum subsidy amount is Rs. 12 lakh. The maximum loan tenure is 20 years and the discount rate for interest subsidy NPV is 9%.
Q1. Can you recommend a loan calculator?
Ans. Almost every financial institutions and Non-banking Financial Companies that provide loans to individuals offer a loan calculator as an online tool to clear all the queries regarding loan repayments. You can consider SBI home loan calculator, or HDFC home loan calculator.
Q2. How much home loan can I get based on my ITR?
Ans. Income tax returns are an important document that financial institutions require before approving a home loan. The amount of home loan varies from banks to banks. For Salaried individuals, Form no 16 is checked to verify the repayment capacity whereas for business professionals past three years IT return is wanted to approve a home loan. Depending on your ITR, the lender will decide how much loan amount can be borrowed so that the repayment procedure remains smooth.