Purchasing a home is on the checklist of every individual’s life. However, real estate prices are increasing, making it difficult for homebuyers to purchase a housing property by making a one-time payment. One of the practical ways is to borrow a home loan to finance a house purchase.
So, if you plan to buy a house and your budget is Rs. 20 lakhs, you can avail a loan of around Rs. 15 lakh. So, it is essential to know the calculation process of Rs. 15 lakhs home loan EMI before availing it. This will help you to plan your finances effectively.
How To Evaluate Rs. 15 Lakhs Home Loan EMI Amount?
The formula to calculate the EMI of a home loan is –
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
P is the principal amount
R is the monthly interest rate (the yearly interest rate is divided by 12 to obtain the monthly interest rate)
N is the number of instalments per month or loan repayment tenure in months.
To understand the EMI calculation easily, let’s take a look at a brief example –
Suppose you have borrowed a home loan of Rs. 15 lakhs from a financial institution. The interest rate is 7.4% per annum (or 0.62 per month), and the repayment tenure is 15 years (or 180 months), then the calculation of monthly instalments is as follows-
EMI = [15,00,000 x 0.62x(1+0.62)^180]/[(1+0.62)^180-1] = Rs. 13,820
Note that this is an approximate calculation of a home loan EMI and the actual amount may vary.
If you find this manual calculation complicated, then use an online tool like a home loan EMI calculator. Several leading financial institutions offer this online tool to simplify the home loan EMI calculation. All you need to do is enter the loan amount, interest rate and repayment tenure to get accurate results without unnecessary delay.
Moreover, this online tool allows you to re-enter different values. This means you can enter interest rates offered by different lenders and select a suitable loan deal that meets your requirements.
How To Reduce Rs. 15 Lakhs Home Loan EMI Amount?
Once you know how to calculate EMI for a home loan of Rs. 15 lakhs, consider the following ways to decrease your EMI payables to reduce your financial burden:
- Choose a longer repayment tenure
Selecting a home loan with a longer repayment window will decrease the outflow of monthly instalments and vice versa. However, you need to pay more money in interest than what you will pay over a shorter repayment tenure.
- Avail a lower interest rate
It is essential to compare the interest rates of home loans offered by different lenders and select the one with the lowest interest rate. A lower interest rate will lessen your burden for paying higher EMIs.
- Improve CIBIL score
Your CIBIL score should be 750 or above. A higher CIBIL score will help you to get a lower interest rate and vice-versa. If your CIBIL score is below 750, then improve it by decreasing your credit utilisation ratio and making on-time payments of outstanding dues.
- Talk With Your Lender
If you share a long-standing relationship with your lender and have borrowed loans previously and paid them on time, you can contact them to negotiate for a reduction of your home loan interest rate. As mentioned earlier, a reduction in interest rate will decrease the EMI payable towards your home loan.
- Make A Substantial Downpayment
If you can make a sizeable downpayment of more than 20% to 25%, your lender can offer you a lower interest rate. This will also reduce your EMI payables by lowering the outstanding amount.
What Are The Factors Affecting Rs. 15 Lakhs Home Loan EMI?
Listed below are a few factors that impact the EMI amount of a home loan of Rs. 15 lakhs:
- Repayment Tenure
In a longer repayment tenure, the EMI payable decreases but interest outgo increases. On the other hand, a shorter repayment tenure attracts a lower interest rate but leads to higher EMI payments. So, choose a suitable tenure to repay the loan easily.
- Interest Rate
You can either select a floating or fixed interest rate for your home loan. In the case of floating interest rate, the rate of interest varies with changes made by the Reserve Bank of India. On the other hand, the fixed interest rate remains the same throughout your repayment tenure.
- Loan To Value Ratio
LTV is the ratio of the value of a property you purchased to the loan amount. A higher LTV ratio indicates a higher credit risk, and you may need to pay a higher interest rate on your home loan.
Availing a sizeable home loan, in this regard, Rs. 15 lakhs, requires effective planning. Among them, calculating Rs. 15 lakhs home loan EMI is one of the first tasks you must do to avoid inconveniences in managing your repayments later.