Buying a home is one of the biggest achievements in one’s life; however, it may involve a lot of financial challenges. Whether you are purchasing your dream house for the first time or repairing your existing property, you must prepare a budget. To simplify this process, you can use a home loan calculator. In this blog, we will talk about how this loan calculator works and how you can plan your finances using this calculator.
How Does a Home Loan Calculator Work?
A home loan calculator is an efficient calculation tool designed to estimate your repayments or EMIs based on multiple factors. These factors include:
- Borrowed amount: This indicates the loan amount you have borrowed from a bank or lender.
- Interest rate: Your interest rate refers to a specific percentage that your lender will apply to your loan.
- Tenure: This indicates the timespan of your sanctioned loan.
- Down payment: It’s the upfront fee you pay to your bank or lender.
These factors, along with your repayment capacity, can influence your repayment structure or EMIs. Therefore, it’s wise to use a home loan calculator and estimate the expenses to avoid potential financial strain in the future.
How do you use a home loan calculator to finance your dream home?
As mentioned, a home loan calculator can simplify your budget estimation process and help in financing your dream home. Let us discuss in detail.
1. Collect all your financial information
To begin this calculation process, let’s collect all your essential financial information. This includes your loan amount, estimated down payment, tenure, and interest rates. Remember, every home loan plan comes with a different interest rate and tenure.
Therefore, ensure you have the right details of interest rates and tenure. If you have any doubts, you can directly raise your queries to your bank or lender.
2. Use an authentic Home Loan Calculator
Many reputed banks and financial institutions have their own home loan calculator; however, it is advisable to use this calculator by visiting their official website. Instead of choosing a random calculator, it’s wise to use your bank’s loan calculator. Such calculators often contain easy-to-understand input requirements and offer accurate estimations.
3. Put all the information correctly
Enter all your information correctly. This might include the loan amount, your credit score, tenure, interest rate, and more. You can customise the loan amount and the tenure based on your financial situation to get an accurate estimate of your EMI.
Similarly, if you are unaware of the interest rate, you can simply visit the lender’s or bank’s website and check the interest rate offered for home loans.
4. Mention the down payment
As mentioned, a down payment is most likely a percentage of the total cost of your home, and it typically ranges between 10% and 25%, depending on the lender. While using a home loan calculator, make sure you mention the down payment amount accurately.
This is essential to get a clear picture of the loan amount required and the EMI you will need to pay.
5. Consider additional factors
Some home loan calculators require additional insights such as interest rate type (whether it’s a fixed or floating interest), property taxes, existing loans, credit score, and more.
Please note that not every calculator demands such information. However, these additional facts can directly or indirectly influence your monthly EMIs.
Final Thoughts
Using a home loan calculator is a smart and efficient way to estimate your monthly EMI. With the help of this calculator, you can finance your dream house effectively without any financial strain.
Remember to choose a reliable calculator and put all the relevant information correctly.
