How To Calculate Your House Loan EMI?
There are several EMI calculators available today on the websites of banks and housing finance organizations in India. While these help you to get a rough idea, there is a catch here. There are several components that culminate to the actual figure. So, don’t rush into a deal because you like the indicative numbers. Instead, follow a simple three step method to get the best deal.
Step 1: Consider the following factors.
Realistic EMI calculation of a house loan requires you to find out:
• The Down payment: Based on company standards, you will need to set aside 15% to 20% of the value of property as down payment. As you pay it in advance, it is not part of your EMIs. But, it is really challenging to set aside such a substantial amount for most people. Make sure that you are aware of this number.
• Other additions to housing loans: Apart from the cost of property, there are other factors that get added to the principal amount of the housing loan such as stamp duty, housing finance processing fees, etc. Stamp duty varies from state to state. Processing charges are based on each organization. While these amounts are small compared to the cost of the property, they are definitely not the change in your pocket either. It is important to factor this into your calculation.
• Home Loan Protection Plan: This is a kind of term insurance cover that helps to cover the pending home loan amount to your bank, in case of death. You have the opportunity to pay it separately or to include it in your principal amount.
Step 2: Identify accurate interest rates.
Once you have calculated your principal amount rationally, you must find out what the interest and the duration for the loan is. Though most banks and housing finance companies show attractive rates in advertisements, the actual numbers can vary based on each case. Most organizations indicate this fact by using an asterisk with such claims. So, you should apply to multiple organizations to identify the best possible rate and calculate the amount payable and EMI accordingly. However, you must always keep in mind that most organizations allow some discount on your interest rate. Though the loan executives insist that interest rates are strictly non-negotiable, you can ask for a lower loan rate.
Step 3: Select customized repayment plan.
Last but not the least; you can opt for a repayment plan that suits your current and future earnings. If you are a professional in your twenties or a young entrepreneur, opt for an accelerated repayment plan that allows you to align your EMI with the income. There are several repayment strategies that optimize your monthly cash flow. For example: If you stand to gain huge income in future, you should ensure that a pre-payment clause in the agreement will allow you to pay the entire sum of loan. So, combine all the factors to calculate your house loan EMI.
