Buying a home is a difficult task, but the abundance of home loans offerings by different lenders has made it easier to become a homeowner. With simpler home loan eligibility criteria, you will also find it easy to qualify for most of these loans. But, to be prudent about such a valuable investment and in order to make repayment easy, choose a trusted lender.
However, just choosing the right lender or loan offer is not enough. You must also pay special attention to the amount you are repaying as EMIs on your home loan in order to keep the repayment stress-free and within budget.
Here are some factors that will help you calculate the home loan EMIs to get a fair idea.
- Interest Rate
Housing loan interest rates play an important role in calculating the EMI amount. When you avail a loan with high interest rate, your cost of borrowing is higher and you end up paying a higher EMI. So, ensure your interest is as competitive as possible. To get a nominal interest, you can ensure you meet all the home loan eligibility criteria and have a good credit score. Secondly, pay attention to the type of interest rate. If you have taken a house loan on a floating interest rate, then it may change with market fluctuations. This means that an increase in the interest can lead to your lender extending your tenor or increasing your EMIs. A fixed rate of interest ensures that your EMIs remain constant through market fluctuations.
- Home Loan Tenor
The home loan tenor directly affects the EMI amount. Basically, the longer your house loan tenor is, the lower will be your EMI and shorter the tenor, the higher will be the EMI. Therefore, even a small change in your housing loan tenor can impact your EMI amount directly. If you can manage other financial obligations with a higher EMI, you can opt for shorter tenor and repay your loan early. You must always keep in mind that longer the tenor, the more overall interest you pay on your home loan. With the help of home loan EMI calculator, you can forecast your finances to select the ideal tenor.
- Prepayment on Your House Loan
All the lenders allow you to prepay your home loan at either a small cost or zero fees depending on whether you have a fixed or floating rate of interest. When you prepay your loan, it lowers your outstanding principal amount, which in turn, lowers your EMIs. However, you must check prepayment charges before you apply for the loan to make an informed decision. It is best for you to then plan your prepayment keeping your increasing income in mind, as this can help you pay off your loan faster.
How to Decrease your EMIs with a Balance Transfer
If a lender is offering you lower home loan interest rates, you can choose to transfer your existing outstanding home loan amount to the new lender. In this way, you end up paying lower EMIs. Consider all the other charges of home loan balance transfer and ensure that your home loan EMIs will considerably reduce with this switch. It is advisable to explore such an option towards the initial period of your home loan to even out processing fees and other costs involved in the transfer. If you only have a few years left on your loan tenor, it may be more feasible to stick with your current lender.
Consider the above factors to make an informed decision about your EMIs beforehand. While applying for your house loan, check your pre-approved offer to access finances quickly and easily based on customised deals tailormade for you.