Owning the house of your dreams need not be a dream anymore. This is because home loans have made purchasing residential property a piece of cake! Multiple lender options, balance loan transfer and dipping interest rates all contribute to the same. Yet, taking home loan is a critical decision because of several factors involved, all of which are subject to change. Most important, the home loan EMI.
Home Loan EMI: Factors that Influence
- MCLR Rates
- Type of Interest
- Loan-to-Value (LTV) Ratio
- Credit Score
- Location of the Property (Developer)
- Job Profile
- Tenure of the Loan
Home Loan EMI: Top 4 Factors that Impact
1. Interest rate change:
The Rate of Interest (ROI) on your home loan may change anytime during your loan tenure. This may be because of change in the lender’s policies. As a result, this change may impact your EMI amount in a positive or negative way.
Most important, home loans taken on floating interest rates are always liable to EMI change. This is in tune with the current loaning rates prevalent in the market. In other words, each time the RBI introduces any change in the bank ROI, it impacts your EMI directly.
2. Loan tenure change:
Sometimes change in the loan tenure decided upon at the time of taking home loan may also affect the EMI. Usually, longer loan tenure means lower EMI, and vice versa. However, longer tenure also involves greater ROI payment.
At the end of the tenure, this means an increase in your total credit cost. Therefore, in case of longer tenures, EMIs may be low but you might be paying off a larger lump sum eventually. Reducing your loan tenure will mean higher EMIs but lower total interest payment.
3. Step-up or Step-down repayment:
This is another aspect to be considered. Your lender may offer two different loan repayment options depending on your income inflow. Step-up repayment is suitable for people at the start of their career because they can expect to earn more over time. Consequentially, their EMI would also gradually increase.
However, for those approaching retirement, step-down is more comfortable because they can start with higher EMIs and gradually pay lesser amounts.
4. Loan balance transfer:
Different lenders offer different rates of interest. Therefore, it isn’t mandatory to stick to the same lender from whom you’ve taken the home loan. The advantage of balance loan transfer enables a borrower to avail interest rate benefits and lower EMIs.
Home Loan EMI Calculator
An online home loan calculator facilitates easy calculation of home loan EMI. All you need to do is enter the loan amount you wish to apply for and the desired loan tenure. The calculator would compute the result based on the lowest ROI offered by the bank in question.
Besides that, the online home loan amortization calculator provides a comprehensive break-up of the EMI and the ROI to repay. It computes the exact results based on the variable EMI components – ROI and principal amount – helping you understand your exact prepayment options.
Taking into account all of the above can help you make a wiser and informed home loan decision. After all, loan amount for 10-30 years isn’t a small deal.
Also view Housing Loan EMI: 5 Tips to Ease Interest Burden
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