In simple words, a home equity loan is a loan you receive using your home's equity as collateral. It is also known as a second mortgage, equity loan, and home-equity instalment loan. You can get this loan against both residential and non-residential properties. The property must be entirely constructed and have a clear title to be eligible for this loan.
The lender will calculate the value of your property based on the current market value. The loan amount will be based on the property's market value after deducting any outstanding home loan balance and can go up to 60% of the net worth. The maximum loan tenure is 15 years. You also have the freedom to spend that loan amount for any purpose you want. There are two types of home equity loans:
Fixed-Rate Loans: As the name suggests, in fixed-rate loans, the entire amount is given in a single lump-sum payment. The interest rate is also fixed and does not fluctuate as per the changes in the market conditions. The borrower has to pay the loan amount in a predetermined period.
Home Equity Lines of Credit (HELOC): HELOC is similar to how a credit card works. In this, you can borrow some amount from the amount pre-approved by the lender. You can make withdrawals from the amount at any time you want through a chequebook or credit card, and interest is calculated only on the amount you have borrowed. However, like fixed-rate loans, HELOC also has a fixed tenure.
How to use Home Loan EMI Calculator
SuGanta Home loan calculator is very easy to use. Any individual who is looking to get a home loan or has already taken a loan can use it to check their EMIs. Take the following steps to check EMIs using this calculator:
Step 1: Enter the amount you want to borrow
Step 2: Enter the tenure (in years) for which you want to borrow
Step 3: Enter the rate of interest
Step 4: Click on “Calculate Your EMI”
After you take all these steps, you will be able to view your monthly instalment on your home loan.
How the Home Loan Calculator Helps You
Using the EMI calculator to know your EMIs in advance can be helpful in many ways. Check out some of the reasons why you should use it:
How much should you borrow? The calculator can help you decide the home loan amount, based on how much EMI you can afford to pay from your income. In other words, you can plan your finances better.
How long should the tenure be? Knowing the EMI you can afford to pay every month, you can determine the right tenure for your loan.
How much down payment should you make? Using the home loan EMI calculator, you can figure out how much you should pay as the down payment, in order to save maximum on your interest while keeping
your EMIs to minimum.
Factors Affecting Home Loan EMI
There are multiple factors that can affect your home loan EMI. Check out some of the key factors below:
Loan amount: The loan amount your borrow affects your EMI. Higher the amount you borrow, the higher your EMI.
Loan tenure: The tenure for which you take a home loan also affects your instalments. If the tenure is longer, your EMI will be lower. Remember, longer tenure also means you pay more interest over
the period as compared to a shorter tenure loan.
Interest rate: In case of floating interest rate loans, your EMI will change in line with the fluctuations in interest rates. If the rate goes up, your EMI also goes up.
An Illustration to understand how your EMI changes with these factors:
The table below shows estimated EMI based on different loan amounts and tenures.
| Estimated EMI* (assuming rate of interest at 7% p.a.)
|
| Tenure
|
Loan amount
Rs 30 Lakhs
|
Loan amount
Rs 60 Lakhs
|
Loan amount
Rs 1 Crore
|
| 5 years
|
Rs 59,403
|
Rs 1,18,806
|
Rs 1,98,011
|
| 10 years
|
Rs 34,832
|
Rs 69,665
|
Rs 1,16,108
|
| 20 years
|
Rs 23,259
|
Rs 46,518
|
Rs 77,530
|
| 30 years
|
Rs 19,959
|
Rs 39,918
|
Rs 66,530
|
How to Reduce Your Home Loan EMI
If you are looking to get a new home loan or if you already have one, here are some tips to help you reduce your home loan EMI:
- Check with multiple lenders before finalizing your loan. Choose the one that offers you the best deal.
- Don’t borrow more than you can afford. If you can’t afford to repay on time, don’t borrow.
- Make a higher down payment. Lower the amount you borrow, lower the EMI.
- Choose a longer tenure (but this also means you will be paying more interest over the period).
- Make a prepayment on your loan, if and when possible.
- Apply for a balance transfer home loan to get a better deal.