Home loans are loans availed of for the key purpose of buying a residential property. The Government of India has always promoted homeownership through various measures, such as by offering home loan tax benefits to borrowers along with various housing schemes, such as the PMAY and the Kerala and Maharashtra Housing Schemes.

One of the other ways in which the Government of India keeps housing affordable is by keeping the housing loan interest rates low. Loan Interest rates impact the loan EMIs that one must pay on their loan as well as the total interest and the cost of borrowing. 

A home loan interest calculator is an online tool that loan applicants can use to ascertain the affordability of their loan by calculating their loan EMIs as well as the total interest that they will have to pay on the loan. 

What is a Home Loan Interest Calculator? 

The home loan interest calculator is an online tool that loan applicants can find on lender websites these days. These calculators are free to use and loan applicants should essentially use them to calculate their loan EMIs and the total cost of borrowing funds. The calculator essentially helps borrowers ascertain the affordability of a loan for them.  

Home loan EMIs are calculated using the following formula: 

EMI = P x R x (1+R)^N / [(1+R)^N-1]

Here, P is the principal amount, R is the monthly interest rate and N is the loan tenor in months. This formula is complicated with many chances of errors entering the calculations if one does the calculations manually. The home loan EMI calculator uses this formula to calculate one's loan EMIs and the total interest outgo on one's loan. 

However, it eliminates any chances of any error entering into one's calculation. In short, the home loan interest calculator not only helps with loan repayment and prepayment planning, but it also helps users save both time and effort. 

Steps to Use the Home Loan Interest Calculator 

Home loan EMI calculators are also often referred to as home loan interest calculators. Here's what using these calculators requires one to do. 

1. The loan applicant should know what they are eligible for and decide the loan amount or principal keeping in mind their income and repayment capacity. The principal that you wish to borrow is the first piece of information that the home loan interest calculator will ask you for. 
2. The next thing that the house loan EMI calculator will ask you to enter is the number of years you will need to comfortably repay your loan. A long tenor makes EMIs affordable but increases the total interest payout on one's loan. Therefore, borrowers should try their best to work out the loan tenor in such a way that the interest on the loan is still low and the EMIs are also still manageable. 
3. Lastly, enter the home loan interest rate your preferred lender is offering you. An excellent credit score, a low debt-to-income ratio, a stable job and income, a low LTV ratio loan, etc., are some of the things you can do to make yourself eligible for a low-interest rate on your loan. 

The home loan interest calculator requires only these three details to calculate one's loan EMIs, the total interest payout on the loan and the total cost of borrowing money. Alongside these three things, the home loan EMI calculator also shares with users a detailed amortisation schedule which they can use to plan repayment, prepayments, foreclosure and balance transfers.

Final Words

The home loan interest calculator is a highly beneficial tool available to loan applicants. It helps borrowers gauge whether the loan they desire is affordable for them as well as work out the loan amount and tenor that will work best for them. It helps borrowers make the right decisions related to their home loan. Therefore, all borrowers can make this tool a part of loan application and repayment planning.