Owing to the launch of Government-backed schemes like Pradhan Mantri Awas Yojana, demand for home loan disbursements in this segment has picked up. However, market research also reveals that the largest amount of home loan delinquency (4.44%) has been noticed in less than Rs. 10 lakh ticket size loans.
For curtailing such issues, financial experts suggest borrowers to assess their EMIs and do solid financial planning before applying for a home loan. So, even if you avail a Rs. 5 lakh home loan, it is ideal to evaluate monthly obligations beforehand and plan your finances accordingly. In this post, you will learn about the basics of a ₹ 5 lakh home loan, benefits, interest rates, and how to calculate EMIs. Read on!
Home loans are basically a secured type of credit used to finance a housing property purchase. Due to its secured nature, the interest rates remain affordable, enabling borrowers to repay the loan smoothly.
However, apart from the loan amount and interest rate, repayment tenure is another component that plays a significant role. In order to keep your monthly liabilities in check, it is essential to choose these values wisely. No matter how small the loan amount is, calculating equated monthly instalments with an EMI calculator is advisable to choose the right combination of these components.
EMI evaluation is necessary even if you avail of Rs. 5 lakh home loan. However, you cannot rely on manual calculations as it tends to become time-consuming. That is why a home loan EMI calculator remains a better alternative. Apart from convenience, here is a list of advantages this financial tool offers:
While using an EMI calculator, you just need to enter the necessary values to get the exact EMI result instantly. The required values include the principal loan amount, repayment tenure and rate of interest.
When you calculate all these manually, the chance of making an error is high, especially when you are comparing different combinations of loan amount and tenure. However, despite providing an instant result, this financial tool does not compromise accuracy. Make sure you are entering the values properly to get an accurate result.
Apart from the exact EMI amount, you also get to learn about the breakdown of principal and interest components for every instalment. This way, you can understand how much of a specific month’s equated monthly instalment goes toward the interest repayment and principal repayment.
Just like before settling for a particular lender, comparing multiple financial institutions is necessary; comparing different loan options remains crucial too. In case you do not want to change the loan amount, try out different combinations of tenure and interest rate. Note that this step is necessary before making a long-term commitment.
Keep in mind that although going for a longer tenure might make your EMIs affordable, it also increases the interest outgo. You need to decide wisely to avoid unnecessary expenses.
A home loan EMI calculator follows a simple formula:
EMI = P x R x (1+R)^N / [(1+R)^N-1]
Here, P stands for the principal amount, R denotes the rate of interest, and N stands for repayment tenure (expressed in months).
In case one wants to assess the EMI manually, this is the formula he/she has to use. Let’s take an example to understand how the EMI evaluation will work using this formula. For instance, Sweta is availing of Rs. 10 lakh home loan at 6.70% interest p.a. for 20 years. In such a scenario, the factors will be:
EMI = 1000000 x 0.55 x (1+0.55)^240 / [(1+0.55)^240-1]
After solving this equation, the EMI will be = Rs. 7,574. When you use the EMI calculator to calculate this, you will be required to enter the aforementioned values to get the result instantly.
When you avail of Rs. 5 lakh home loan, there are certain factors of your loan’s EMI that can play a significant role. The following are some aspects that influence a home loan EMI:
You get to choose a repayment tenure of up to 25 years from Navi and make your EMIs affordable. Choosing a longer tenure automatically brings down the monthly instalment amount; however, it also increases the overall interest cost. On the other hand, going for a shorter tenure help you get rid of your financial liabilities quickly but increase the EMI too. Make sure to choose the repayment tenure wisely to avoid any convenience.
When you decide to prepay your home loan, you are basically clearing a specific portion of the outstanding loan before the tenure ends. This way, your loan’s total outstanding amount is getting reduced substantially, further bringing your EMI down. While several reputed lenders offer this feature to help borrowers lower their EMI burden, it comes with additional charges too. Look out for the extra charges before taking such a decision.
Depending on the interest rate of your loan, you can decide how much you can actually borrow so that it does not impose a huge financial burden on you. Higher interest rates automatically increase the equated monthly instalment amount. Even though lenders offer affordable interest rates on secured loans, it is advisable to compare multiple home loan providers before choosing one.
Other than these, the down payment plays a crucial role in home loan EMIs. When you provide a substantial amount from your own pocket, you will have to borrow less. When you make a substantial down payment, your monthly instalment amount will inevitably get reduced.
Rate of Interest (P.a)
Loan Tenure (Years)
Here’s how to use Navi’s home loan EMI calculator and calculate your EMI:
You can adjust these values and try out different combinations before you settle for one. Navi offers home loans up to Rs.5 crores with an interest rate starting from 8.39% p.a. Download the Navi app to get a home loan.
This particular section shows how going for different repayment tenures will change your equated monthly instalment amount. Here, both the principal amount (Rs. 5 lakh) and the rate of interest (6.5%) will remain constant.
To help you find a suitable lender, here are some home loan interest rates provided by top financiers:
|Lending Institutions||Interest Rates Starting From (per annum)||Processing Fees|
|Navi Home Loans||8.74% onwards||Nil|
|Kotak Mahindra Bank||8.75% onwards||0.5%|
|Axis Bank||8.10% onwards||1%|
|Yes Bank||8.95% onwards||1.5%|
|ICICI Bank||8.95% onwards||0.5% – 2%|
|HDFC Bank||8.75% onwards||0.50%|
|Bank of Baroda||8.45% onwards||0.50%|
|Bank of India||9.10% onwards||0.25%|
|LIC Housing Finance||8.90% onwards||Check with lender|
|Federal Bank||8.55% onwards||0.50%|
|Union Bank of India||7.40% onwards||0.50%|
|Reliance Home Finance||9.75% onwards||0.5% – 1%|
Whether you avail of Rs. 5 lakh home loan or a higher amount, assessing monthly obligations is necessary using an EMI calculator. This way, it becomes easier to maintain your other financial liabilities without missing EMI payments.
Ans: To avail of a home loan, you will need to provide the property’s original sale deed, possession letter, No Objection Certificate from the society, etc. Besides this, you would also need to furnish personal documents, including proof of identity, income proof, and address proof.
Ans: If your property is still under construction, you can avail of a housing loan without its registration documents. Nevertheless, you will have to acquire a completion and registration certificate after its construction is complete. A pre-existing relationship with your chosen lender can also reduce the hassle involved with documentation.
Ans: The primary benefit of co-applicants is that lenders consider the income and credit score of both borrowers. This increases the chances of loan approval. Additionally, with better creditworthiness, lenders offer attractive housing loan terms.
Ans: The primary motivation behind a balance transfer is to reduce your overall interest cost. Studying the amortisation schedule reveals that a borrower pays the maximum amount of interest during the initial stages of loan repayment. Therefore, to maximise savings, ensure that you refinance the home loan early on during the tenure.
Ans: Pradhan Mantri Awas Yojana or PMAY benefits are available to individuals who do not own a pucca house in India. Therefore, in case of a loan for your second property, you will not be eligible to claim PMAY subsidies.
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 Rate||Home Loan EMI Calculator||Home Loan Tax Benefits|
|Home Loan Prepayment Calculator||Minimum CIBIL Score For Home Loan||How to Apply for Home Loan|
|Home Loan Prepayment||NBFC Home Loans In India||Home Loan Stamp Duty|
|Home Loan Balance Transfer||Home Loan Types||Home Loan Process|
|NRI Home Loan||Home Loan Insurance||Benefits of Joint Home Loan|
|Documents Required For Home Loan||Top Banks And NBFCs for Home Loans||Home Loan For Women|
|Home Construction Loans||Home Loan Sanction Letter||Loan Against Property Interest Rates|
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