It is necessary to understand home loan EMI if you are considering purchasing a property. Your EMI is a sum you pay back to your lender every month. Thus, to determine an EMI that suits your lifestyle the best, apply an EMI calculator and try various loan amounts, interest rates, and tenures.This ensures that you don’t take a loan that will affect your financial objectives. Let’s look into home loan interest rates and the application process:
What is a Home Loan EMI?
Home loan EMI (Equated Monthly Instalments) is the amount that you will return every month to your lender until the loan is repaid. It includes repayment of principal and interest. The benefit of clearly understanding your home loan EMI is knowing the repayment schedule clearly.
The EMI is derived from only three contributing factors:
- Loan amount
- Interest rate
- Loan tenure
Generally, financial institutions evaluate your repayment ability by considering about 55% to 60% of your disposable income for EMI commitments, helping you avoid over-borrowing.
Understanding Interest Rates Charged on Home Loans
The more competitive the interest rate is, the better the EMI and overall repayment will be on the loan. Lenders usually offer:
- Fixed rates: Your EMI will remain the same for the duration of the loan, giving predictability.
- Floating rates: Your EMI changes based on market conditions, sometimes offering savings when rates fall.
Even a small shift in interest rate can have a big impact on your repayment amount. For example, suppose you get a loan of ₹30 lakh with a 20-year tenure at an interest rate of 8.25%. Here, your EMI will be approximately ₹25,562, and the total interest will be ₹31,34,873. But if the interest rate goes down by even 0.25%, i.e. 8.00%, your EMI will come down to ₹25,093, which may not seem like much, but over time, you save over a lakh because your total interest goes down to ₹30,22,368. With EMI calculators, you can try different combinations of loan terms and see which one best fits your needs.
Application Process
If you follow a proper application process for a home loan, it is quite hassle-free. Although the process varies from lender to lender, the following is a general idea:
- Know the eligibility criteria of the lender and see how much loan you can avail.
- Compare institutions to select the best offer.
- Keep the required documents (identity, income, property, etc.) ready.
- Submit the application online, or at their branch.
- Wait for the lender to evaluate and inspect your property.
This is a very simple process, and you can pick the appropriate loan amount and repayment timeline without having to confront the hassles. With a reliable financial institution such as PNB Housing, you can get easy and affordable financing solutions that make the journey stress-free.
Being aware of how interest rates impact EMIs and planning your repayment period well will help ensure an easy home loan experience. This will enable you to make the optimal choice, stay within your budget, and achieve your dream home.
Also Read: PNB Housing Finance to raise Rs 4,000 crore led by Carlyle
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