How to calculate Home Loan EMIs and know the eligibility
Owning a home is everyone's dream. Given that the cost of house is relatively high compared to salary and savings of a person; it is made affordable due to the concept of house loan and their EMIs.
When a person want to take a House Loan, it becomes important to understand Home Loan Eligibility criteria and also how Home Loan EMI calculator works.
Home Loan Eligibility is dependent on many factors including Age, Income, Source of Income, Assets and Liabilities, Savings among others.
Before a bank is shortlisted for taking a loan, make sure you fit into the Home Loan Eligibility criteria of the bank. Do some basic checks before making an application.
- Make sure the term of the loan you want to take (e.g. 25 years) is also what the bank provides.
- If you want loan for new or existing flat, row house, villa, freehold property, etc… make sure the bank provides loans in general, related to your specific requirements
- Different banks have different documentation requirements. They are generally related to identity proof, age proof, proof of address for residence/business, signature proof, income proof, bank statements, Income tax returns, education qualifications, etc… Make sure you will be able to provide the required documents.
After you have made sure, you fit into the high level Home Loan Eligibility criteria of the bank, it is advisable to check your Credit Score. A good credit score will make sure you get a better rate of interest. Depending on your credit risk profile, bank may approve the House Loan and Home Loan EMI payment may range from 40% to 60% of your monthly income.
Besides the above, technically your Home Loan Eligibility amount is determined based on;
- How much you can afford to pay back as "EMI" each month
- "Interest rate" at which the bank will give you the loan
- "Duration" for which you want to take the loan (in years or months)
Please use the Home Loan EMI calculator,if one wants to know how EMI is calculated.
The "loan amount" you want to take, annual "interest rate" finalized by the bank and the "term" of the loan, will determine the Equated Monthly Installments (EMI)
The formula for EMI is
EMI
=
P
r (1+r)n
(1+r)n-1
Where;
P = Principal component of Loan Amount
r = interest rate calculated on monthly basis (e.g. 10.5% annual interest rate, so 10.5%/12 months = 0.875% per month or 10.5/12/100 = 0.00875)
n = number of months within which loan to be re-paid
For example, if you borrow Rs. 30,00,000 from a bank at 10.5% per annum for a period of 15 years (i.e. 180 months), then EMI = 30,00,000 * 0.00875 * (1+0.00875)180 / ((1+0.00875)180 – 1) i.e. Rs. 33,161.97. This will be the output of the Home Loan EMI Calculator
Summary
- Home Loan Eligibility is dependent on multiple factors, with repaying ability within term of loan being the most important for house loan. Also refer the Home Loan Affordability Calculator
Home Loan EMI Calculator gives the EMI amount based on loan amount, interest rate and loan term
When a person want to take a House Loan, it becomes important to understand Home Loan Eligibility criteria and also how Home Loan EMI calculator works.
Home Loan Eligibility is dependent on many factors including Age, Income, Source of Income, Assets and Liabilities, Savings among others.
Before a bank is shortlisted for taking a loan, make sure you fit into the Home Loan Eligibility criteria of the bank. Do some basic checks before making an application.
- Make sure the term of the loan you want to take (e.g. 25 years) is also what the bank provides.
- If you want loan for new or existing flat, row house, villa, freehold property, etc… make sure the bank provides loans in general, related to your specific requirements
- Different banks have different documentation requirements. They are generally related to identity proof, age proof, proof of address for residence/business, signature proof, income proof, bank statements, Income tax returns, education qualifications, etc… Make sure you will be able to provide the required documents.
After you have made sure, you fit into the high level Home Loan Eligibility criteria of the bank, it is advisable to check your Credit Score. A good credit score will make sure you get a better rate of interest. Depending on your credit risk profile, bank may approve the House Loan and Home Loan EMI payment may range from 40% to 60% of your monthly income.
Besides the above, technically your Home Loan Eligibility amount is determined based on;
- How much you can afford to pay back as "EMI" each month
- "Interest rate" at which the bank will give you the loan
- "Duration" for which you want to take the loan (in years or months)
Please use the Home Loan EMI calculator,if one wants to know how EMI is calculated.
The "loan amount" you want to take, annual "interest rate" finalized by the bank and the "term" of the loan, will determine the Equated Monthly Installments (EMI)
The formula for EMI is
EMI
=
P
r (1+r)n
(1+r)n-1
Where;
P = Principal component of Loan Amount
r = interest rate calculated on monthly basis (e.g. 10.5% annual interest rate, so 10.5%/12 months = 0.875% per month or 10.5/12/100 = 0.00875)
n = number of months within which loan to be re-paid
For example, if you borrow Rs. 30,00,000 from a bank at 10.5% per annum for a period of 15 years (i.e. 180 months), then EMI = 30,00,000 * 0.00875 * (1+0.00875)180 / ((1+0.00875)180 – 1) i.e. Rs. 33,161.97. This will be the output of the Home Loan EMI Calculator
Summary
- Home Loan Eligibility is dependent on multiple factors, with repaying ability within term of loan being the most important for house loan. Also refer the Home Loan Affordability Calculator
Home Loan EMI Calculator gives the EMI amount based on loan amount, interest rate and loan term
Source...