A mortgage loan allows you to avail credit against the property. In this transaction, your house or apartment acts as collateral for the borrowed money. However, before applying for such a credit, you must assess the monthly instalments you would need to pay for such a loan. A mortgage calculator can help you in this regard.
What is a Mortgage Calculator?
Opting for a loan against property is a big decision as it can affect your financial situation for many years to come. Therefore, to understand your loan repayment burden, you need to use a specialised online tool, known as the mortgage loan calculator.
Such a calculator is a handy tool where you can find out the exact EMIs you would need to pay against a particular loan amount. It takes into consideration three factors to reach an accurate assessment, the principal amount, tenor and rate of interest charged.
Trying to perform these calculations manually is not only time-consuming but also leaves room for error. Here is the complicated formula that you need to follow when conducting these calculations yourself.
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Note that, in the given equation, P denotes the principal sum, R stands for the interest applicable and N indicates the tenor for the loan converted into months. Thus, as you can see, the mortgage calculator greatly simplifies the job and reduces effort, making it an indispensable tool.
How do you Use the Mortgage Loan Calculator?
Almost every step-by-step guide for a loan against property application refers to using this EMI calculator for comparison purposes. Mentioned below is the exact procedure for using it.
- Step 1 – Access the mortgage calculator online. Most lenders today offer similar tools on their loan application page.
- Step 2 – Enter your loan amount into the specified section of this tool.
- Step 3 – Fill in the rate of interest the lender applicable on the loan. If you do not know the exact figure, contact the NBFC in question and ask them about this.
- Step 4 – Enter the loan tenor, according to your preference and repayment ability.
- Step 5 – Click on calculate to instantly find a complete breakdown regarding the interest amount and monthly instalments for the chosen amount of credit.
You can perform such calculations multiple times, testing loan amounts and tenor to find the best combination for you.
How does Each Factor in the Calculation Affect Your EMIs?
Simply understanding the application of a LAP EMI calculator is not enough. You must also understand how the loan amount, interest rate and tenor affect your credit and repayment.
1. Loan Amount
Higher loan amounts result in greater monthly instalments. Therefore, even though most lenders offer a substantial loan based on the valuation of your property, you should only avail as much as you require.
Use the mortgage calculator to pick a manageable sum of credit, preventing unnecessary financial burden during the repayment tenor.
2. Rate of Interest
Depending on the lender of your choice, the interest rate for mortgage loans can vary. Higher rates result in greater payments over the repayment tenor and vice versa. You should pick your loan carefully, ensuring the rate of interest suits your payment ability.
Financial institutions like Bajaj Finserv offers credits at an affordable rate of interest, ensuring minimum financial strain during the repayment process. Bajaj Finserv also provides pre-approved offers on loan against property to make availing such loans simpler and faster. These offers are available for a range of secured and unsecured credits, such as personal loans, business loans, home loans, credit cards and more. You can check your pre-approved offers by providing your name and phone number.
A perfect tenor for such a loan is subjective. Some people prefer smaller EMIs afforded by longer tenor, while others prefer a shorter repayment duration even if it means higher monthly instalments. One of the ways to ensure you do not default on your loan against property is to pick a suitable tenor.
Thankfully, LAPs offer great flexibility when it comes to this repayment period, ranging from some months to 20 years. Pick the maximum time to keep the EMIs as low as possible. It will ensure timely repayment and eliminate any chance of defaulting, helping you build a good credit history overall.