Home Loan Calculator

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Home Loan Calculator

A home loan refers to the money borrowed from banks and other financial institutions for buying a house, flat or a plot of land (to construct a house) or to undertake renovation, extension and repairs to an existing house. The property is taken as collateral or security by the lending company until the loan is repaid with the due interest. In the event that the borrower fails to pay the dues, the lending institution will hold legal rights to recover the outstanding loan amount through the sale of the said property. The interest charged on home loan can be on a floating or fixed basis, or a combination of the two, depending on the borrower’s requirement.

It is important to note that tax benefits can be claimed on home loan repayment. The interest paid for the year can be claimed as a deduction from total income up to a maximum of Rs. 2 lakhs under Section 24 of the Income Tax Act, 1961. Under Section 80EE of the Act, an additional tax deduction can be claimed by first-time home buyers up to Rs. 50,000 per financial year on the interest portion. The principal paid for the year is allowed as a deduction under Section 80C up to a maximum of Rs. 1.5 lakhs.

How Home Loan Calculator works

The Home Loan Calculator computes the EMI payable on a home loan, on the basis of the details entered by the user. An individual will be required to input the loan amount, interest rate and tenure into the calculator, and the tool will calculate the amount payable as EMIs. The loan amount here refers to the money borrowed for purchasing a house. The interest rate is denoted as a percentage charged by the lender on the loan, and tenure is the time allotted or chosen to repay the loan.

Formula for Calculating EMIs on Home Loan

The mathematical formula that can be applied to calculate EMIs on home loan is:

EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

  • Here, P stands for the principal loan amount,
  • R is the interest rate per month and
  • N is the number of monthly instalments.

Eligibility Criteria for Home Loan

The eligibility criteria to avail a home loan will differ from one lender to another. Listed below is the basic home loan eligibility criteria for some of the financial institutions across the country:

Kotak Mahindra

Eligibility Criteria for an Individual

Age:

  • Salaried individuals should be between 18 and 60 years of age
  • Self-employed individuals should be between 18 and 65 years of age

Gross Income of Resident Indian Individual:

  • Mumbai, Delhi, Bangalore, Pune and Chennai - Minimum income has to be Rs. 20,000 per month.
  • Other cities - Minimum income should be Rs.15,000 per month.

Minimum Qualification:

  • Graduate - when the individual is employed with a private limited company or partnership firm. However, if the applicant is working with a Public limited company, MNC, Government or Public Sector Company, then there is no such criteria.

Source: Kotak Mahindra Bank

Bajaj Finance

  • Age Limit of Salaried Individuals - 23 to 62 years

  • Age Limit of Self-Employed Individuals - 25 to 70 years

  • Required CIBIL Score - Minimum 750

  • Work experience of Salaried Applicants - At least 3 years

  • Business Continuity - At least 5 years

  • Minimum Salary - Rs. 25,000

  • Nationality - Indian, residing within the country

Source: Bajaj Finance

Axis Bank

Salaried individuals eligible for home loan

  • Individuals in permanent service in the government or reputed companies come under the home loan eligibility criteria.

  • Applicants must be above 21 years of age during the time of loan commencement and up to the age of 60 or superannuation, whichever is earlier at the time of loan maturity.

Home Loan Borrowing Limits

  • Minimum - Rs. 3 lakhs

Margins

  • For home loan up to Rs. 30 lakhs - 10%
  • For home loan greater than Rs. 30 lakhs up to Rs. 75 lakhs - 20%
  • For loan greater than Rs. 75 lakhs - 25%

Source: Axis Bank

Benefits of Online Home Loan Calculator

There are several benefits to using a home loan EMI calculator. Here is a look at a few of them:

  • Saves time and effort: Through the use of a home loan calculator, individuals are able to find out the EMIs they will need to pay within a matter of seconds. They do not have to invest time toward manual calculations. All that users will need to do is input the loan amount, interest rate and loan tenure, and the calculator will show how much they will need to pay as EMIs.
  • Correct results: In case of manual calculation, there is always room for error if one is not careful with the numbers. On the other hand, one can be certain of accurate results when using home loan calculators.
  • Helps plan finances: On entering key details of a home loan into the calculator, users can ascertain how much they would have to pay as EMIs. Knowledge of this is necessary as it will help them identify whether they can afford the loan, and the impact it will have on their financial health.

Factors Affecting Interest Rates on Home Loan

Some of the factors that have an impact on home loan interest rates include:\

Marginal cost of funds based lending rate (MCLR) - This is the minimum interest rate, below which a banking institution is not allowed to lend. MCLR is determined after factoring in tenor premium, marginal cost of funds, operating costs and negative carry on account of cash reserve ratio. Given that these elements differ among lenders, the MCLR can also vary to a large extent. Institutions with lower MCLR generally have lower lending rates for clients with same credit profile.

The MCLR of the banks shall impact interest rate even after sanction. Banks review home loan interest rate of their current customers at least one time a year on a pre-specified reset date. The MCLR on that date shall remain applicable on home loan until the next reset date, regardless of any changes in MCLR in the interim months.

Credit score - This is a three-digit number, representing an individual’s creditworthiness. It can range from 300 to 900, and the closer the figure is to 900, the better. Most banks and other financial institutions accept applications from users whose scores are 750 and above.

Many lenders also factor in the credit scores while ascertaining the interest rates for their loan applicants. Those with high scores are charged lower interest rates, while applicants with low scores end up paying more in interest. It is essential for individuals to strive to improve their credit scores prior to applying for a loan as it will give them an upper hand.

Property location and value - The area where a property is situated and its value also influence the interest rate on home loan. Houses in close proximity to good amenities such as grocery stores, shopping centres, bus stops, hospitals, schools etc. tend to have a higher value than those with few amenities and poor connectivity. Home loans availed for properties with poor amenities tend to carry a higher risk for the lender since their resale will be difficult.

The same is applicable to the age of the building. Newer properties are considered more lucrative. So, if an individual is buying a property that is old and not in an up-and-coming neighbourhood, chances are the applicant will be asked to pay a higher rate of interest.

Interest Rates offered by Top Banks on Home Loan

HDFC

Retail Prime Lending Rate: 16.75%

Loan SlabHome Loan Interest Rates (% p.a.)
For Women (up to 30 Lakhs)8.55 to 9.05
For Others (up to 30 Lakhs)8.60 to 9.10
For Women (30.01 Lakhs to 75 Lakhs)8.80 to 9.30
For Others (30.01 Lakhs to 75 Lakhs)8.85 to 9.35
For Women (75.01 Lakhs & Above)8.85 to 9.35
For Others (75.01 Lakhs & Above)8.90 to 9.40

Source: HDFC

SBI

The mean interest rate for Home Loans for the quarter ended June 2019 is: 8.5901

Term loans up to Rs. 30 lakhs (1-yr MCLR: 8.25%)

Revised Interest RateSalaried Borrowers (%) Non-Salaried Borrowers (%)
Women, LTV ≤ 801 Year MCLR+ 10 bps, ER:8.351 Year MCLR+ 25 bps, ER:8.50
Women, LTV > 80 and ≤ 90 1 Year MCLR+ 20 bps, ER:8.451 Year MCLR+ 35 bps, ER:8.60
Other, LTV ≤ 801 Year MCLR+ 15 bps, ER:8.401 Year MCLR+ 30 bps, ER:8.55
Other, LTV > 80 and ≤ 90 1 Year MCLR+ 25 bps, ER:8.501 Year MCLR+ 40 bps, ER:8.65
Term loans above Rs. 30 lakhs and up to Rs. 75 lakhs (1-yr MCLR: 8.25%)
Revised Interest RateSalaried Borrowers (%)Non-Salaried Borrowers (%)
Women, RG-1, 2 ,31 Year MCLR+ 35 bps, ER:8.601 Year MCLR+ 50 bps, ER:8.75
Women, RG-4, 5, 61 Year MCLR+ 45 bps, ER:8.701 Year MCLR+ 60 bps, ER:8.85
Other, RG-1, 2, 31 Year MCLR+ 40 bps, ER:8.651 Year MCLR+ 55 bps, ER:8.80
Other, RG-4, 5, 61 Year MCLR+ 50 bps, ER:8.751 Year MCLR+ 65 bps, ER:8.90

Source: SBI

Axis Bank

For salaried individuals

TypeLoan AmountMCLR + Mark UpEffective Rate of Interest
Floating RateLoan amount up to Rs. 30 LakhsMCLR + 0.30%8.90% p.a.
Floating RateLoan amount up to Rs 75 LakhsMCLR + 0.45%9.05% p.a.
Floating RateLoan amount above Rs 75 LakhsMCLR + 0.50%9.10% p.a.
Floating RateTop Up for existing customersUp to 30% - Same rate at which the home loan is running 30%-100% - LAP rate shall be applicableUp to 30% - Same rate at which the home loan is running 30%-100% - LAP rate shall be applicable
Fixed rate (for 20 years)All Loan Amounts-12.00%

Source: Axis Bank

FAQs on Home Loan Calculator

Which documents have to be submitted when applying for a home loan?

The documents required when applying for a home loan will vary from one lending institution to another. Some of the common documents that lenders insist on include address proof, identity proof and income proof.

What is floating rate of interest in home loan?

Loans in case of floating rate of interest are linked to benchmark rate. So, when the lender raises or brings down the benchmark rate, the rates of the loans shall fluctuate. Accordingly, the EMI or loan tenure will increase or decrease.

What is a fixed rate of interest in home loan?

A fixed rate of interest would mean that the interest rate of the loan would remain constant throughout the loan period and therefore, the EMI of the loan would remain fixed.

What are the tax benefits available on interest portion of home loan?

Under Section 24 of the Income Tax Act, individuals can claim a tax deduction of up to a maximum of Rs. 2 lakhs on the interest paid. Additionally, under Section 80EE, an additional tax deduction can be claimed by first-time home buyers up to Rs. 50,000 per financial year on the interest portion.

What factors determine home loan eligibility?

Banks and other financial institutions take a number of factors into consideration while determining a borrower's eligibility for a home loan. Some of the elements considered include the applicant's age, credit score, occupation, minimum income and property value, among others.

Who can be joint borrowers of a home loan?

Immediate family members like spouse, parents and children are generally allowed to be joint borrowers of a home loan.

What happens if an individual defaults on payments?

Banks may levy a late-payment fee when an individual is not able to keep up with the EMI payments. However, in the event that the borrower is unable to repay back the loan, the bank will have the right to auction the property to cover losses.

Does the tenure impact the loan cost?

Longer the loan duration, the lower will be the EMI, but higher would be the interest outgo. In case of shorter loan tenures, one pays a greater EMI, but since the loan gets repaid sooner, the borrower ends up paying less by way of interest.

Will MCLR be different among banks?

Yes, MCLR can be different among different banks given that it depends on the marginal cost of funds, operating costs, negative carry on account of CRR and tenor premium of respective lenders.

Are securities necessary for home loans?

The property being purchased becomes the collateral and is mortgaged to the lender until the entire loan amount is repaid. In some cases, additional security like FD receipts, life insurance policies and share or savings certificates may be required.

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