Learn everything you need to know about EMI for home loans, from what it is to how it’s calculated and tips to manage it effectively. Read on to make informed decisions about your home loan. 1.2 billion young people between the ages of 18 and 24 constitute around 16% of the total population, and by 2030 this number will increase to 1.3 billion. With such a rapid increase in the young population globally, there will be an increase in the demand for home loans.
One of the biggest desires of the young population is to buy their own home because it provides security and safety to their families. You might aspire to become a house owner, and one of the best options to convert your dream into reality is to choose the option of paying for home loans.
EMI for Home Loan – A Primer
EMIs are monthly installments that you have to pay when buying any property. The EMI includes the principal amount and the rate of interest. The amount of interest remains stagnant throughout the year in fixed-rate loans.
However, the interest rate will change depending on the benchmark lending rates if you choose a floating-rate loan.
The EMI for a home loan amount depends on the total cost of the property, the number of years for loan repayment, the rate of interest, and your eligibility for a home loan. You can calculate eligibility using a home loan eligibility calculator, most available online for free.
5 Things to Analyse When Deciding for Home Loan EMI
There are certain key factors that you should consider before choosing your EMI for a home loan.
Analyse Current Monthly Expenses vs Income
You can make an excel sheet where you can rationally compare your income and monthly expenses. This will provide a clear picture of the number of years required to pay off your debt and will also help in investing your savings in either fixed deposits, LICs, or mutual funds.
You can also keep a certain amount aside just for paying your EMI for a home loan, so you feel financially secure even in times of financial crisis.
Analyse Your Current Situations and Responsibilities
Your current responsibilities should influence the amount of EMI you can pay for your home loan. If you are the only earning member at home and your kids or parents are dependents, you might consider a longer duration to re-pay your EMI for a home loan.
But if you have no liabilities, you can choose your EMI amount based on your income and personal expenses.
Analyze the Rate of Interest Before Deciding on the EMI for a Home Loan
Before selecting your lender, visit various financial institutions and select the one offering affordable interest rates for home loans. This will save you from overspending as well as financial hassles.
Remember, the interest rate determines the EMI you will be paying for the entire tenure, so choose carefully.
Related Post: The importance of the EMI Calculator in getting a Loan
Choose a Flexi Hybrid Home Loan
You can choose a Flexi hybrid home loan if you have fewer savings currently. This provides an option of paying just the interest for the initial years of the loan tenure.
After you get an appraisal, you can pay the principal and the interest together to complete the remaining debt. This option provides flexibility and convenience for people who are paying EMI for a home loan.
Choose Home Loan Balance Transfer to Complete Your EMI for Home Loan
If you feel your current EMI is out of your budget, you can switch to a lender providing lower interest rates.
Once you have transferred your home loan, your new lender will settle the outstanding loan amount with the previous lender, and your documents will be released as soon as the amount is paid off.
Bonus Tip – Use a Home Loan Eligibility Calculator
One of the most crucial factors for home loan approval is your eligibility.
Before you apply for a home loan from any financial institution, please check your eligibility with the help of a home loan eligibility calculator and make informed decisions.
In conclusion (Equated Monthly Installment) is a crucial aspect of a home loan that borrowers must understand thoroughly. It represents the monthly payment you make towards your loan, including the principal amount and interest. By knowing how EMI is calculated, borrowers can plan their finances and choose a repayment plan that suits their budget. It’s also important to keep in mind the impact of factors such as the loan amount, interest rate, and loan tenure on the amount. By managing your EMI effectively, you can ensure timely repayment of your home loan, avoid defaults, and maintain a good credit score.