Kiran wants to buy an apartment worth Rs. 60 lakh, but manages to save only around Rs. 20 lakh. She has no other option but to arrange the remaining amount using a home loan. However, like most financial decisions, availing a housing loan blindly can ruin her finances.
The following article elaborates on all aspects one must consider when looking for an Rs. 40 lakh home loan.
Home loans are specialised forms of secured credit that you can avail yourself of when looking to buy a property or land. In the case of an Rs. 40 lakh home loan, you would need to find out the interest rate and tenure options available. For such a considerable amount, the equated monthly instalments or EMIs would be substantial as well.
As a borrower, you need to calculate such EMI before loan application. While manual calculation is possible, using a home loan EMI calculator is better in every sense.
Loan Amount
Rate of Interest (P.a)
%
Loan Tenure (Years)
Years
Monthly EMI
0
Total Interest
Total Amount
EMI calculators are specialised online tools that can aid you in determining your monthly liabilities toward a housing loan. With it, you can decide if a particular loan amount is affordable for you.
Since home loans are long-term financial commitments, ascertaining the exact liabilities is crucial for enjoying a hassle-free repayment. Such a calculator would also allow you to plan a budget for the entire repayment tenure.
As stated previously, you can choose to calculate EMIs manually for a home loan. However, doing so is time-consuming. It can also lead to errors in calculation and other issues. The following are some reasons why an EMI calculator is a better alternative:
EMI calculators only need you to enter information in their specific fields. Firstly, you need to enter the loan’s principal amount, which in this case is Rs. 40 lakh. Besides this, you need to enter the loan’s rate of interest. The tenure or repayment period of said credit is the last thing you have to provide.
The calculator will instantly find out your EMIs based on this information.
Manual calculations always run the risk of errors. Even a minor mistake can lead to misconceptions about your Rs. 40 lakh home loan EMIs. Fortunately, a calculator does not make such mistakes. Considering that you enter your loan’s principal, interest rate and tenure correctly, such an online tool will always show you an accurate result.
Home loan calculators are free-to-use online tools. Therefore, these encourage borrowers to compare different loan options until they find the most suitable choice. You can keep the loan amount unchanged and keep altering the interest rate or tenure to see different EMI scenarios.
Advanced EMI calculators also provide loan amortisation schedules after calculation. This schedule is a breakdown of interest and principal components for each month’s EMIs. Therefore, you can check exactly how much of a particular month’s EMI would go toward the principal and interest repayment.
All home loan EMI calculators follow a simple formula, which is –
EMI = P x R x (1+R) ^ N / [(1+R) ^ N-1]
In this formula, the different factors are –
Therefore, let’s assume an example. Kiran avails an Rs. 40 lakh home loan at 6.7% interest p.a for 20 years. In such a case, the factors would be the following –
EMI = 4000000 x 0.55 x (1+0.55) ^ 240 / [(1+0.55) ^ 240-1]
Solving this equation, you would get EMI as Rs. 30,296.
When obtaining an Rs. 40 lakh home loan, five factors play a significant role in determining your EMIs. These are as follows –
Interest rate
How much interest you are liable to pay depends on the rate at which a financial institution is lending you the sum. Higher rates would lead to increased interest liabilities and higher EMIs, and vice versa.
Tenure
You have to be careful when picking up such a loan’s tenure. A considerable repayment period would reduce your EMIs and increase the loan’s interest cost. Opting for an excessively restricted tenure can reduce the interest burden but can raise your EMIs substantially.
Down payment
When buying a property, you cannot borrow its entire cost from the lender. You have to pay a part of it from your pocket. This is called a down payment.
If you pay a larger portion of the cost through a down payment, you would need to borrow less. Thereby, your EMIs would be lower in such cases.
Prepayment
Prepaying is clearing a portion of the outstanding loan before time. Doing so lowers the principal outstanding, thereby decreasing subsequent EMIs. Remember that prepayment can involve certain additional charges, depending on the financial institution.
If you are about to borrow an Rs. 40 lakh home loan from Navi, here’s how you can use the calculator –
Step 1
Visit Navi’s website and hover your cursor on home loans. From there, select the EMI calculator option.
Step 2
When this calculator opens, use the slider or appropriate field to choose your principal amount.
Step 3
Adjust the second slider to reflect your preferred loan repayment tenure. This can range from a year to 30 years.
Step 4
In the third and final field, enter your home loan’s interest rate. Navi offers home loans starting from just 8.74% per annum.
After these adjustments are complete, the calculator will show your EMIs instantly. To use the tool on the go, you can download the Navi App for free. The financial institution offers a housing loan of up to Rs. 10 crores.
In the following section, consider the loan amount as Rs. 40 lakh and the interest rate as 6.5%. Now, let’s see how the EMIs differ when only the tenure of the loan changes. Notice how the EMIs reduce with an increase in tenure or repayment term.
Tenure | EMI |
15 years | Rs. 34,844 |
20 years | Rs. 29,823 |
25 years | Rs. 27,008 |
To simplify your choice, here is a selection of lenders providing home loans and their respective rates in 2022 –
Name of Lender | Starting Interest Rate |
Navi | 7.39% |
State Bank of India | 7.55% |
Axis Bank | 7.60% |
ICICI | 7.60% |
HDFC Bank | 7.55% |
Regardless of the amount of home loan you want to borrow, using an EMI calculator is vital. Such a tool can help you plan your finances beforehand, thereby ensuring easier repayment.
Borrowers can also understand how each factor of a home loan affects the monthly liabilities after using such a calculator. This is especially true for big-ticket borrowings, such as Rs. 40 lakh home loans.
Ans: A home loan balance transfer is the process of shifting your outstanding home loan principal to a different lender. Usually, a borrower would decide to transfer his/her balance if the new lender charges a favourable interest rate. With lower interest, the borrower’s EMIs reduce automatically, lowering his/her monthly liabilities.
Ans: You can find out the total interest cost of a loan by using an EMI calculator. All you have to do is enter the values for the loan amount, rate of yearly interest and number of months of repayment period (tenure). The results will show the monthly instalment and total cost of interest.
Ans: Choosing to clear your home loan using an increased term can help reduce your EMIs. However, such a decision also comes with a major drawback. By the end of this period, you would have to pay a significantly higher interest cost.
Ans: Besides the borrower’s eligibility, several external factors also play a role in determining your home loan’s interest rate. The Reserve Bank of India’s repo rate is the most important among them. Based on the country’s economy, the RBI increases or decreases its repo rates. This, in turn, leads to an increase or decrease in housing loan rates.
Ans: Foreclosing a home loan refers to repaying the outstanding sum before the tenure runs out. Doing so can be beneficial in some regards, such as savings on total interest cost and a boost in the borrower’s credit rating. However, you should consider that foreclosure usually involves an additional charge to the lender before opting for it.
Are you looking to buy that house you’ve been eyeing 🏠 and you need a loan of up to ₹5 crore. Install the Navi app now and get instant in-principle approval right away! Interest rates starting at 8.60% p.a.
Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
Home Loan Interest Rates in India 2023 – EMI and Charges
With RBI increasing its repo rate to 6.50%, lenders have increased their home loan interest rates t... Read More »What is a Relinquishment Deed? – Meaning, Format, Documents, Benefits and Procedure
A property may have more than one heir. In case one of the property owners want to give up their sh... Read More »Conveyance Deed – Meaning, Importance, Format and How to Get it?
Conveyance Deed Meaning A conveyance deed is a contract that serves as a legal proof of transfer... Read More »MCLR (Marginal Cost of Funds Based Lending Rate)
Prior to 1st April 2016, if you went to a bank to avail of a loan, you would be charged an interest... Read More »Best Banks and NBFCs for Home Loans in India – Interest Rates and Eligibility
If you are planning to buy a home, you must start comparing the interest rates and loan repayment t... Read More »NBFC Home Loans: Complete List, Interest Rates and How to Apply
With more NBFCs or Non-Banking Financial Companies launching loan apps, it has become easier for po... Read More »Best Home Finance Companies (HFCs) in India 2023
Housing Finance Companies (HFCs) are Non-Banking Financial Companies (NBFCs) that specifically cate... Read More »Get Home Loan In Dharwad – Interest Rates and How to Apply Online
Dharwad, located in the north-western part of Karnataka, is a developing industrial hub of the stat... Read More »How to Apply for a Home Loan in Bangalore – Interest Rates and Eligibility Criteria
Getting a home loan in Bangalore wouldn't be too difficult if you have the repaying capacity and a ... Read More »Home Loan Repayment Calculator – Best Ways to Repay Home Loans
Home loan repayment (foreclosure) refers to the complete repayment of the outstanding loan amount t... Read More »8 Home Loan Tips You Should Consider
Buying a home is a dream come true for many. This is a crucial decision in someone’s life financi... Read More »Tips to Consider Before Purchasing Your First Home
Buying your first home is essential, and emotional for many in India. It is one of the most sought-... Read More »Top 10 Chit Fund Schemes in India in 2023
Chit funds are one of the most popular return-generating saving schemes in India. It is a financial... Read More »10 Best Gold ETFs in India to Invest in March 2023
Gold ETFs or Gold Exchange Traded Funds are passively managed funds that track the price of physica... Read More »10 Best Demat Accounts in India for Beginners in 2023
Creation of Demat accounts revolutionised the way trades were conducted at the stock exchanges.&nbs... Read More »20 Best Index Funds to Invest in India in March 2023
What is an Index Fund? An index fund is a type of mutual fund or exchange-traded fund (ETF) that... Read More »Best Arbitrage Mutual Funds to Invest in India in March 2023
Arbitrage funds are hybrid mutual fund schemes that aim to make low-risk profits by buying and sell... Read More »10 Best SIP Plans in India to Invest in March 2023
What is SIP? SIP or Systematic Investment Plan is a method of investing a fixed amount in ... Read More »10 Best Corporate Bond Funds in India to Invest in March 2023
Corporate bond funds are debt funds that invest at least 80% of the investment corpus in companies ... Read More »10 Best Bank for Savings Account in India 2023 – With Interest Rates
Savings account is a type of financial instrument offered by several banks. It lets you safely depo... Read More »