Essential things to know while calculating interest on home loan…
Property loan emi calculator varies based on the loan amount, the applicant’s creditworthiness and prior relationship between the lender and borrower. These loans have two types of interest rates – fixed rates and floating interest rates. Under fixed rate loan the ROI remains constant throughout the loan period, while in floating rate loans the ROI is linked to market conditions and may change periodically. They could be linked to the base rate, inflation, or other parameters, each bank selects its own methodology to fix this base rate. These rates have to be declared by the bank each quarter. Some leading private finance companies offer loans in the form of adjustable rate of interest loan, Trufixed loan (2 to 3 year fixed rate variant) or Trufixed loan (10-Year Fixed Rate Variant).
The lending rates decided by banks or finance companies are determined by their cost of funds and the net interest margin they must earn to cover operating costs and also earn a profit. Finance companies or banks usually offer lower interest rates on housing loans compared to personal loans, because they grant finance against the security of the borrower’s home, which helps the banks to lower the financial risks.
While deciding an individual’s maximum eligibility for a housing loan, his or her income source is considered – this helps the lender determine the EMI that can be afforded by borrowers. Property loan emi calculator prove to be higher for people who work in the unorganized sector, while self-employed and salaried people who have stable income source can perceive loan at preferential rates.
Home loan monthly installment consists of two key components, the principal repayment, and interest applicable on the loan amount. When the rate of interest is high, the EMI component directed towards meeting the interest is also high, while the EMI’s principal repayment becomes lower. Therefore, property loan interest rates are crucial while deciding the calculation of home loan eligibility.
When a home is initially taken at a certain interest rate that later gets converted to floating rate, the applicable formula for the conversion is specified in the loan agreement. Currently, it is used as MCLR added with a spread determined by the bank as per the prospective borrower’s credit profile. As per the rules, private finance companies are required to revise their housing loan interest rate periodically either once every six months or once a year.
Most fixed Property loan emi calculator offers a fixed rate of loan tenure not exceeding 15 years. In the loan agreement, check the timeframe through which your housing loan interest remains fixed at the rate it was originally allocated. The loan agreement also explains the formula if your home loan gets converted to a floating interest rate.
Banks or finance companies provide loan up to maximum of 80% of the agreement value of the house. Every bank or finance company has its own criteria for which you will have to show the margin money of around 15 – 20% handy before applying for a loan.
Therefore, make sure you have saved at least 20% of the down payment and also have little extra savings to cover a few months of your home loan payment. Recession, health risks or other perils don’t come knocking at your door so it’s better to be prepared to cover your expenses for a couple of months. This shows your good preparedness towards your loan and you will have more probable chances for home loan approval. Few banks & private finance companies offer women with a concessional Property loan emi calculator compared to that applicable to male borrowers. This concessional rate is also applicable in case of a joint loan applicant.