10 MAY, 2022

Once you decide to buy a home, the first step should not be to start looking at homes but to figure out your home loan eligibility and Equated Monthly Instalment (EMI) amount. This is because once you are clear about how much housing loan you are eligible for and how the EMI fits into your monthly budget, you can look at homes in the appropriate price range. You can take out a calculator or open an excel sheet to calculate your home loan EMI, but the easiest way to do so is to use a home loan calculator.

Home loan calculator inputs

Your home loan EMI depends upon three primary things – home loan interest rate, loan amount, and loan tenure. Each of these factors are crucial in deciding what your cost of borrowing is going to be. Hence, it is essential to take a minute to understand these factors.

  • Home loan amount: This is also called the principal. It is the amount you are borrowing from the lender when you apply for a home loan. It is usually 80% of the value of the home. The remaining 20% is what you need to pay and is called the down payment. If you can arrange for a higher down payment, that would work in your favour as it would reduce your debt obligation when buying a home.

  • Home loan interest rate: A lender charges a rate of interest for providing a home loan. This is the cost of borrowing which you need to pay back along with the principal amount over the loan tenure. The principal and interest together make up the EMI. The home loan interest rate depends primarily on the benchmark interest rate, your age and income, your credit score, the type of property, and your loan tenure.

  • Home loan tenure: The amount of time you take to pay back the home loan principal and interest is called the loan tenure. This is usually long term, 20 years or more, but can also be short term. Your ideal home loan tenure depends upon your age, income consistency, and loan amount. It is important to note that the longer your loan tenure, the more your interest outgo will be. However, it is essential to choose a loan tenure that allows you to comfortably meet your monthly EMI payments.

How to use Kotak’s home loan calculator

When using Kotak’s home loan calculator, you simply need to enter your loan amount, interest rate, and loan tenure. Once you do so, you will get all the information you need about your home loan EMI instantly. Your monthly EMI along with the total interest and total amount payable over the loan tenure will be given.

In addition to this, you will also receive your home loan amortization table. This table essentially breaks down the interest and the principal amount that you pay year by year and shows you your yearly opening balance, interest paid, principal paid, and closing balance. Hence, by using Kotak’s home loan calculator, you can get clarity on the way you can finance your home and what that is going to look like for you throughout the loan tenure.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.