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Why is it Advised to Calculate the EMI Before Taking a Home Loan?

While this loan remains a driving force to fulfill people’s housing dreams, it is always advisable to consider a few factors

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EMI, Home, Loan
Today, by approaching the right lender, you can avail up to 80% of the property as a housing loan to fund its purchase. Pixabay

With a large amount and an extended repayment tenure, home loans are more of a commitment than a credit. Today, by approaching the right lender, you can avail up to 80% of the property as a housing loan to fund its purchase. While this loan remains a driving force to fulfill people’s housing dreams, it is always advisable to consider a few factors to bring out the best of your home advance. EMI

One such factor is the use of a housing loan EMI calculator to determine your EMIs. As these are long term loans that may extend up to 20 years, one must foresee and plan about the finances that will go into repaying the loan amount.

EMI, Home, Loan
Now, take a closer look at what a home loan calculator is all about before moving on to reasons that back up its use.

With the use of this calculator, you can arrive at the right decision as to the number of years you want this loan for, or the total amount you will be able to afford. Now, take a closer look at what a home loan calculator is all about before moving on to reasons that back up its use.

How do EMI Calculators help calculate the EMIs?

A housing loan calculator computes the EMI amount you will need to pay every month for the repayment of your credit. It also gives you an insight into the total interest you will pay by the time the repayment tenure ends.

To compute the monthly installments, you are required to input three specific details like – 

  • The total credit amount
  • Your chosen loan tenure
  • The rate of interest

After you provide these details, the calculator uses the amortization method to calculate your payable EMIs. Hence, if you change the home loan interest rates, or any other detail entered, it will compute a new EMI.

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You may, therefore, arrive at a suitable EMI as per your repayment capacity. It also defines the loan amount you should avail and the tenure you should opt for.

With these details about what EMI calculator is and how it functions, you may now check out why it is advisable to calculate EMI before you take a house loan.

Reasons why you should calculate your EMIs before taking a house loan:

 

  • You can make a sound financial plan for the coming years
EMI, Home, Loan
With a large amount and an extended repayment tenure, home loans are more of a commitment than a credit. Pixabay

 

With the computed EMI amount, it becomes easier to make better financial plans for the future. Like, if you have decided on a given loan amount and tenure, computing the EMI as per this input can give you an insight into whether you can go for a more substantial amount or not.

 

  • It helps find your eligibility for the loan

 

If you know your home loan eligibility beforehand, it reduces the chances of application rejection. Once you have calculated the payable EMI using home loan eligibility calculator, you can check your debt-to-income ratio, which is one of the factors that affect your home loan eligibility. With such eligibility, you can get a high-value loan of up to Rs. 5 Crore from reputed NBFCs.

 

  • You can compare and choose the best lender and streamline finances

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As different lenders offer housing loan at varying interest rates and loan tenure, calculating EMIs with an EMI calculator makes it easy to compare the offers. You can thus choose the best lender to avail a loan.

With this, you get a clear picture of your finances that go towards house purchase, and also plan for part-prepayment or foreclosure. Hence, it is always advisable to calculate your EMIs before you apply for a loan. With an estimated amount, you can proceed with the steps to easily get a home loan in India.

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Top Facts To Know About Home Loan And Taxes

The Government of India offers home loan tax benefits to individuals who take a loan to purchase their first house

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Home loan is a thing which is required for everyone at least once in their life to fulfill the wish of owning a house.
Many people are used to considering the home loan as a loan with the help of which we can purchase a house. Pixabay

The Government of India offers home loan tax benefits to individuals who take a loan to
purchase their first house. The aim is to provide a boost to the real estate market and encourage individuals to own homes. You can also avail tax benefit on the interest paid on all your home loans, regardless of whether it was for your first home or not. Let us take a look at the various scenarios involved:

Deduction for principal repayment
Under Section 80C of the Income Tax Act, the actual principal repaid towards your home loan can be claimed as a deduction. The deduction is available for your first home. The deduction is also applicable to a rented home when the owner is staying in a different town for work. The maximum deduction available under Section 80C is ₹1,50,000. The limit is raised to ₹2,00,000 for senior citizens.

loan, home, tax, India, purchase
The aim is to provide a boost to the real estate market and encourage individuals to own homes.

Deduction for interest paid on a home loan
Income tax benefit on home loan also includes deduction on the interest paid under Section 24 of the Income Tax Act. If the construction of the home was completed within five years of the loan disbursal, actual interest paid up to ₹2,00,000 are allowed as a deduction when calculating the taxable income for the individual. The cap is increased to ₹3,00,000 for senior citizens if the loan was for a self-occupied first home. If the construction of the home is not completed within five years, the tax exemption is allowed up to ₹30,000 only.

Additional deduction under Section 80EEA
Under Section 80EEA, an additional deduction of ₹1,50,000 can be availed if the loan was for the purchase of an affordable house under ₹40 lakh till March 2020. Again, this deduction can only be availed for a self-occupied first home.

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Additional deduction under Section 80EE
If you have taken a loan for your first home after 1st April 2016, you may be eligible for an
additional deduction of ₹50,000 under Section 80EE of the Income Tax act. You can avail this deduction if your home finance was for less than ₹35,00,000 and the value of the property was under ₹50,00,000.

Deduction for interest paid pre-construction
Deduction on home loan interest rate is only available after completion of construction or
immediately on the purchase of a fully constructed house. But the EMI payments would start as soon as the loan is disbursed. You could still claim Income tax benefit on home loan interest paid during the construction phase – you would do this after the construction has been completed. The interest paid can be claimed in equal parts for five financial years post-completion, up to a maximum of ₹2,00,000 per year. The limit includes both the interest paid in the current year and the deduction being claimed for the interest paid during the construction of the property.