Use the Home Loan EMI Calculator and Save at Different Stages
Last Updated : Nov. 24, 2020, 6:50 p.m.
Making calculations is necessary when it comes to enjoying a home loan journey that can be as long as 30 years. Not only do you need to calculate before taking a home loan, but also afterward to ensure continued savings for you. But how can you do so? Simple, use the home loan EMI calculator and calculate your repayment estimates at each stage – at the time of taking a home loan, and when transferring and prepaying the loan. So, we will first brief on how the Home Loan EMI Calculator functions and then go on to explain its use at different stages of the loan. Let’s begin!
How Does the Home Loan EMI Calculator Work?
The function of the calculator depends on just three variables – loan amount, interest rate and tenure. Once you enter these variables in the calculator, you will get to see the Equated Monthly Installment (EMI) and total interest payable over the loan term. Not only that, but you can also see a break-up of principal and interest portions of the EMI either on a monthly or yearly basis. With such calculations and disclosures, you can plan your home loan journey better.
How Will the Home Loan EMI Calculator Help When Taking a Loan?
Most consider the home loan interest rate at the time of applying , which is quite a good thing to do. As the home loan runs for a long time, if you get higher interest rates, your overall interest obligations can be much more. This could happen even as you could pay the resulting EMI without any discomfort. So, choose the lowest interest rate after comparing the rates online. Secondly, most don’t pay much attention to the home loan tenure they would like to have. As a result, some choose a very long tenure and end up paying much more.
So while applying, use the average interest rate range of most lenders and the tenure they provide, in the Home Loan EMI Calculator and see the numbers that come out. Figure out the best repayment estimate and ensure you get the same from the lender. It will help boost your savings and ensure financial harmony.
The Role of Calculator When Doing a Home Loan Balance Transfer
A home loan balance transfer is worth having given the savings it has in store for you. With a balance transfer, you can switch the loan to another lender at a lower rate of interest and save. But when should you do that to ensure maximum savings? This is where the Home Loan EMI Calculator will come in handy for you! The calculator will tell you that a balance transfer will lead to more savings when it is done quite early, within 2-6 years of taking a home loan. So, if your home loan is within that period or even a few years more, a balance transfer will be good. Let’s use the Home Loan EMI Calculator considering two different times of balance transfer and see the differences that emerge.
Example – You have taken a home loan of INR 50 lakh for 20 years at 7.95% per annum. Now, how much more will you save doing a balance transfer at the end of the 5th year compared to when you do the same after the 15th year? Assume you get a balance transfer rate of 7.40% at both times.
| Home Loan Repayment | Repayment Estimates When Doing a Balance Transfer at the end of the 5th Year (In INR) | Repayment Estimates When Doing a Balance Transfer at the end of the 15th Year (In INR) |
|---|---|---|
| EMI Payable at 7.95% | 41667 | 41667 |
| Interest Payable at 7.95% | 49,99,972 | 49,99,972 |
| Interest Payable Till 5 Years | 18,73,203 | - |
| Outstanding Balance After 5 Years | 43,73,211 | - |
| Interest Payable Till 15 Years | - | 45,57,334 |
| Outstanding Balance After 15 Years | - | 20,57,356 |
| EMI Payable After Balance Transfer | 40292 | 41127 |
| Interest Payable After Balance Transfer | 28,79,366 | 4,10,294 |
| Interest Paid Till Now + Interest Payable After Balance Transfer | 47,52,569 | 49,67,628 |
| Savings | 2,47,403 (49,99,972-47,52,569) | 32,344 (49,99,972-49,67,628) |
We have made calculations using the Home Loan EMI Calculator. You can see by doing a balance transfer early, you are saving more. The interest rate difference shown here is just 0.50%. Imagine if the difference in interest rate is more, how much more could you save by doing a home loan balance transfer?
How Will the Calculator Boost Your Savings When Doing a Prepayment?
A home loan prepayment, like a balance transfer, can also bring substantial savings for you. A prepayment means paying off the outstanding loan balance before the expiry of the original tenure. Now, you can pay the principal outstanding balance either in full or in parts. In either of the two, you can have savings. You can calculate the same using the Home Loan EMI Calculator. Here also, if we could consider an example, it will help us understand the point better.
Example – You have recently taken a home loan of INR 50 lakh at 7.95% for 20 years. So, if you do a full prepayment at the end of 14 years, how much will you save? Plus, how much will it be more than the savings if you do part payment of INR 6 lakh at that time? Let’s find out using the Home Loan EMI Calculator.
| Home Loan Repayment | Repayment Estimates When Doing a Full Prepayment (In INR) | Repayment Estimates When Doing a Part Payment (In INR) |
|---|---|---|
| EMI Payable at 7.95% | 41667 | 41667 |
| Interest Payable at 7.95% | 49,99,972 | 49,99,972 |
| Interest Payable Till 14 years | 43,82,723 | 43,82,723 |
| Outstanding Loan Balance at the end of 14 Years | 23,79,243 | 23,79,243 |
| Savings When Doing a Full Prepayment | 6,17,249 | - |
| Part Payment Amount | - | 6,00,000 |
| New Outstanding Balance After Part Payment | - | 17,29,243 |
| EMI Payable After Part Payment | - | 30277 |
| Interest Payable After Part Payment | - | 4,50,703 |
| Interest Payable Before Part Payment + Interest Payable After Part Payment | - | 48,33,426 |
| Savings on a Part Payment | - | 1,66,546 (49,99,972-48,33,426) |