Selecting the dream home and purchasing it with a home loan is not the end of the home-buying process. The prospective home buyer needs to make multiple decisions to smoothen the entire process, one of which is to choose the loan amount that best suits one’s requirements. The applicants need to calculate how much they can fund from their savings and how much they need to borrow. Although several lending institutions provide convenient housing loans at competitive interest rates, comparing the alternatives and making an informed decision is essential.
While applying for a home loan, the borrower is most concerned about the down payment. It is when a house loan calculator serves as a vital tool. Let us see how this calculator can ease the loan planning process and help the borrower decide better.
Why Use a Home Loan Calculator?
According to the RBI guidelines, no lender can fund 100% of the property’s price as a home loan. Most lenders finance up to a maximum of 80% of the home cost, and the borrower must pay the remaining price as a down payment. The bigger the down payment one makes, the less one needs to borrow, and the easier will be the loan repayment. For instance, the Grihashakti housing loan funds up to 90% of the property’s cost. However, the final LTV ratio depends on the applicant’s eligibility and the property’s location and value. Therefore, it is worth using a housing loan calculator to know the loan amount so the borrower can plan the loan and repayment accordingly.
Factors Affecting the Loan Amount
Although lending institutions fund a significant percentage of the home’s cost, the final loan amount depends on several factors, including the following:
- Down Payment: The down payment an applicant agrees to pay makes a big difference in the loan amount. Paying a higher down payment means the applicant will contribute more towards the property purchase and borrow less from the lending institution. A higher down payment also reduces the home loan interest rate for the borrower.
- Property’s Location and Condition: A well-maintained property in an urban, well-connected area attracts a higher loan amount from lending institutions. Such property has a higher resale value, meaning a lower risk of loss for the lending institution
- Applicant’s Income and Financial Obligations: An applicant with a good monthly income and fewer financial obligations qualifies for a higher loan amount. That is why they must enter their income and DTI ratio in the house loan calculator while calculating their loan amount.
- Applicant’s Credit Score: An applicant’s borrowing capacity depends on their credit score. Lenders check this score to evaluate their creditworthiness and determine their loan amount and interest rate. The higher the credit score, the higher the loan amount an individual is likely to get.
- Applicant’s nature of employment: Applicants with a stable income such as salaried professionals employed at a reputed organization have higher chances of getting approved for a home loan at favorable terms.
Why Use a Home Loan Calculator?
Using a home loan calculator helps an individual assess how much loan amount they are eligible to borrow. Knowing this amount beforehand helps a person in making several crucial loan-related decisions, including the following:
- Deciding the down payment they must pay from their savings
- Knowing the EMIs they have to adjust their monthly budget
- Make a budget and plan their finances according to the EMI amount
- Dealing with existing financial obligations to fit in the EMIs
- Selecting the loan tenure as suitable to their repayment capacity
Steps to Use a Home Loan Calculator
An individual does not need to be a math prodigy to calculate the loan amount they are eligible for. Using a house loan calculator is a simple process that involves only a few steps. These are:
- Visit the lender’s website
- Find their house loan calculator
- Enter the required details, including the applicant’s monthly income, net monthly obligations, property’s market value, interest rate, and loan tenure
- As the user enters the details and adjusts the sliders, the loan amount and EMI get displayed on the screen automatically
- Once the user arrives at their desired loan and EMI amount, they may hit the ‘Apply Now’ button to apply for a home loan
The Grihashakti housing loan is one of the best solutions available to home loan borrowers. Use their home loan calculator to calculate the loan amount and apply with a clear perspective.
