Calculating Your Way to Homeownership: Utilizing a House Loan Calculator

Buying the home of your dreams can be daunting for millions of people worldwide. Most people who purchase a house opt for a house loan. Due to insufficient funds required to purchase a home outright, people take loans from financial institutions or banks. The intricacies involved around the concepts of interest rates, EMIs, loan tenures, etc., can be understood by these banks. On the contrary, the commoner finds it overwhelming to keep track of their EMIs and other such data. This is where a home loan calculator comes into play. This blog will talk about everything related to a home loan calculator and how you can use one in your journey towards homeownership. 

What is a home loan calculator?

 A home (or house) loan calculator is often called a mortgage calculator. It is a digital tool made to help potential homebuyers understand their cost of borrowing, interest payable, EMIs, etc. The calculator presents the data based on the input given by the person. It usually asks the homebuyer to enter the loan amount, loan tenure, rate of interest, down payments/ prepayments (if applicable), etc. Once you enter the relevant details, you will be provided with the data you need.  

How does a home loan calculator work?

A home loan calculator works just like a regular calculator, as it generates results based on the input given by the user. A home loan calculator instantaneously presents you with the details you need regarding your home ownership. To use a home loan calculator, you need to have the details mentioned below.

• Loan amount – First, you must enter the loan amount. Also known as principal amount, the loan amount is the amount a person wants to borrow from the bank. The loan amount might be impacted by a few variables, such as down payment, value of the property, and any added funds you might need to take care of. 
• Interest rate – The most prominent aspect of your mortgage, the interest rate, is what you need to enter next. This is the rate at which the bank gives you the money. The interest rate may be fixed or variable and is mostly written as a percentage. 
• Loan tenure – The total duration over which a borrower intends to repay the loan is known as loan tenure. A longer tenure usually results in lower EMIs, while a shorter tenure may result in higher EMI. 
• Down Payment or Prepayments – Most borrowers are asked to make a down payment or a prepayment on their loan amount. The calculator will ask you to enter details of such payments if they have been made. 

After you provide your home loan calculator with this information, it will generate your monthly EMIs. You will obtain a subtle breakdown of your EMIs, the interest you paid, and the outstanding balance until you repay the loan entirely. 

Benefits of using a home loan calculator

A home loan calculator can offer you plenty of benefits, and we have discussed some of them below. 

• Financial Planning – A house loan calculator is an easy-to-use devise that allows you to experiment by altering the loan amount, rate of interest, tenure, etc. Even by slightly changing one of these variables, you get to realize the impact created on your overall EMIs. This allows you to look at various options and choose the best.
• Convenient – A home loan calculator allows you to generate EMI details without the hassle of doing everything manually. The calculators save a lot of time by providing prompt results. 
• Improves decision-making – You can make informed decisions using a home loan calculator based on your financial capacity. You can go through multiple scenarios by altering the inputs and eventually make a good decision.  

Conclusion 

Purchasing a house is one of the most significant financial decisions you will ever make. Convenient methods of EMI calculations must guide your journey to home ownership. This is exactly where you need a home loan calculator to make good and budget-friendly financial decisions. The calculator offers a wide range of advantages you can make the most out of.

Read: How To Claim For Tax Saving On Home Loan Payments In ITR?