The most straightforward way to find out how much an individual can borrow to purchase a residential property is by using a Home Loan calculator. The Home Loan EMI calculator allows the borrower to vary the amount to be borrowed, i.e. the principal, the rate of interest and the tenure of repayment to arrive at a feasible EMI for the loan. By doing so, and finding out the approximate EMIs for a range of tentative Home Loan amounts, the applicant can arrive at the right sum to borrow. This will help in assessing the EMI a prospective loan applicant will have to pay each month from his/her earnings as part of the repayment.
Having said that, a Home Loan calculator does not account for the additional expenses that add up to the overall cost of borrowing. Here, we are referring to the processing charges, stamp duty, registration fees, down payment and any other cost. These are mostly one time expenses that will have to be borne by the applicant in the initial stages of availing the loan and are not constant, like the EMI.
The EMI calculator allows the borrower to determine the affordability of the Home Loan as he/she can tally the EMI against the monthly income from all sources. In order to have a healthy and practical debt to income ratio, the EMI should not exceed 1/3rd of the monthly earnings.
Applicants should compare existing Home Loan schemes and interest rates offered by various banks and NBFCs to find the most suitable option for themselves.
Aman Khanna is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has an MBA in finance from Toronto University as well as years of experience delivering seminars on sound financial practices and debt management.