You dream of a home, a place to call your own. If you cannot afford it your aspiration ends up remaining a dream. However, thanks to the multitude of financing options available, a home loan can help you buy your dream home.
You can avail a housing loan from any bank or a financial institution. NBFC’s like Tata Capital, too disburse home loans to potential home buyers because they know the importance of having a place to call your own.
Once you know how much home loan you need, it is better to check with potential lenders. You can check your eligibility criteria to get a better idea if you can avail a home loan, with financial institutions such as Tata Capital.
As soon as you know that you are eligible for a housing loan and have all the correct documentation, you have to decide on the final contours of the housing loan in terms of the amount of home loan, tenure and interest rate. These become important because you have to repay the housing loan along with interest applicable. After all, you can’t have your cake and eat it too!
In order to help you to repay the home loan comfortably, Tata Capital offers you several options for repaying the loan. You can know more about our various Home Loan EMI options at the Tata Capital website.
Before you decide on your EMI options you will have to know how much you can and are willing to pay as an EMI.
Is it important?
The perennial question is why is important to know your EMI outflow? As the name suggests EMI is the amount you pay every month for a fixed tenure to repay the home loan. The EMI is so structured that it takes into account two components – the principal and the interest. The EMI encapsulates the principal and interest components into one amount to facilitate convenience of repayment for both the lender and you, the borrower. The concept is that you pay a constant EMI throughout the tenure of the loan.
Unless you are ready to swim, you shouldn’t jump into the river! Calculating your EMI allows you to plan your monthly expenses prudently – especially the amount of outflow towards the EMI for repaying the home loan. Since the amount remains the same for most of the tenure of the home loan, you can plan your budget and finances in a much better way so that you do not default on your EMI.
So how do you calculate your EMI? EMI is a function of compound interest rate, home loan amount and tenure. You can use a home loan EMI calculator to calculate the EMI for particular values of the home loan amount, interest rate and tenure in months. You should use this calculator to calculate EMI for different values of home loan amount, interest and tenure to see the effect and choose the one that is most affordable for you.
Effect of interest on EMI
Once you know how much EMI you would need to pay, you will need to get a good idea on which interest rates suits you the best. You have the option of a fixed rate or floating rate. In a fixed rate of interest, the rate is fixed throughout the tenure of home loans and consequently, the EMI stays constant throughout.
In a floating rate of interest, the interest rate may change depending on the RBI policy. When RBI increases or decreases policy rates, interest rates also change, proportionately. This increase or decrease in interest rate will also cause an increase or decrease in EMI when the amount of home loan and tenure remain constant.
Since the concept is to have a constant EMI, lenders typically adjust the tenure when interest rates change. This means that if the interest rate increases, the tenure goes up proportionately where EMI and home loan amount remain constant. Similarly, if the interest rate decreases, the tenure comes down proportionately where EMI and home loan amount remain constant.
For instance, if you take a home loan amount of Rs 50 lakh for the tenure of 360 months at 10% interest rate, then as per the EMI calculator, the EMI works out to Rs 43,879. With this EMI, the total outflow from you would be Rs 1,57,96,288. This means that you would have paid an interest amount of Rs 1,07,96,288 (Rs 1,57,96,288-Rs 50,00,000).
If you change the tenure to 180 months, then the EMI would become Rs 53,730. With this EMI, the total outflow from you would be Rs 96,71,446. This means that you would have paid an interest amount of Rs 46,71,446 (Rs 96,71,446-Rs 50,00,000).
EMI is all about planning. If you still have doubts and need them cleared, Tata Capital is the right place to get Home Loan assistance, you can call or visit the website. You can also apply for a home loan online and make your dream, of buying a new house, come true.