Ultimate Guide to Using a Mortgage Calculator for Homebuyers 2024

May 3rd 2024
Finance

Purchasing a home is a big financial decision that has to be well thought out and planned. It's a thrilling milestone, but it also has its difficulties, especially when it comes to knowing how much you may borrow. However, by examining several important factors with the aid of a house loan eligibility calculator, you may acquire a better understanding of your affordability. We'll walk you through the process of calculating the loan amount you can get to buy your dream home in this blog.

What is a Mortgage Calculator?

A mortgage calculator or home loan EMI calculator is useful for calculating monthly payments based on the home price or loan amount. However, it may not provide an accurate representation of all associated costs. It is important to make adjustments and consider additional expenses to avoid any surprises.

Important Mortgage Terminologies You Should Know

Before we delve into the process of using the mortgage calculator to find out the monthly payment of a home price, we want to discuss some important mortgage terminologies in this section.

1. Down Payment: Lenders can disburse up to 90% of the property’s value as a home loan. The remaining amount must be funded by the home buyer. RBI allows lenders to sanction 70% to 90% of the property value. Borrowers should have a plan for financing their down payment
2. Floating Interest Rate: A floating interest rate is influenced by market fluctuations. If you opt for a floating interest rate for your home loan, the interest rate can go up or down during your repayment period, based on market conditions
3. Fixed Interest Rate: Interest rates that are fixed remain steady through the loan duration, regardless of the market fluctuations. They stay constant and do not change at any time during the agreed-upon term
4. Tenor: The repayment timeline of a home loan as specified by the lender. Within this period, you are required to pay off the principal amount along with the interest. Typically, lenders offer a tenor of up to 40 years
5. Resale: It refers to buying a home from a previous owner instead of directly from the builder
6. Joint Ownership: It means that a property is owned by 2 or more people. In this type of ownership, all homeowners are responsible for repaying the loan
7. Sanction Letter: It is a formal document utilized to confirm the approval and details of the loan by the lender, providing legal proof of your eligibility and approval
8. Collateral: It is an asset that you need to provide the lender as a guarantee for the loan. In the case of a home loan, the collateral is the property you want to purchase using the loan
9. Disbursement: The loan amount being credited to your bank account is called disbursal. Lenders can initiate this process after verifying your profile and documents. Home loans can be disbursed at once or in parts
10. LTV or Loan-to-Value Ratio: It indicates the percentage of property value that can be obtained as a home loan, typically ranging between 70% and 90% according to the RBI
11. Equated Monthly Instalments or EMIs: EMI refers to the monthly payments made to lenders for repaying a loan. It includes both the principal amount and the interest. Borrowers are responsible for paying back the full amount
12. Foreclosure: When you pay off your loan before the end of your tenor. To foreclose a home loan, you have to repay the entire outstanding amount in full. No additional fee is placed on individuals with floating interest rate home loans if you choose to foreclose

How To Use a Mortgage Calculator in India?

• Step 1: Pick a Trustworthy Website: Find a reputable home loan calculator website by doing some internet research first. These resources are available for free on a lot of financial advising websites. Pick a trustworthy one that delivers precise outcomes.
• Step 2: Enter the Needed Loan Amount: Find out how much you want to borrow from a lender. This sum should be in line with your financial constraints and the down payment you can make. Fill out the calculator with this sum.
• Step 3: Choose the Loan Term: The amount of years you intend to repay the mortgage is referred to as the loan term. The typical time frame is 15, 20, or 30 years. Choose a loan term that fits your plans after giving thought to your financial objectives. Use the calculator to enter this word.
• Step 4: Enter your Age and Gender: Entering your age and gender comes next. Age has a significant role in calculating the loan amount since it influences the years of repayment. Gender and city may also be questions on some websites.
• Step 5: Confirm your Occupation: Entering your age and gender comes next. Age has a significant role in calculating the loan amount since it influences the years of repayment. Gender and city may also be questions on some websites.
• Step 6: Mention your Annual/Monthly Income: Your yearly income after all PF, medical, and tax deductions should be entered in the following area. The sum of the take-home pay less the costs are regarded as dependable income in the case of a business person. Include the co-applicant's annual income if there is one. Your home loan eligibility is improved when you apply with a co-applicant.
• Step 7: Current Monthly EMI/Obligation: Some websites also want regular monthly payments, and the loan amount varies as a result. Think about your normal expenses like electricity, and food, and debt repayments like credit card balances, vehicle loans, and school loans.
• Step 8: Submit: The calculator will provide you with an estimated loan amount given by a variety of reputable banks and housing finance firms once you have entered all the required information. This number will help you understand what you can afford. Spend some time going through and analysing the data, and if necessary, contemplating various possibilities.
• Step 9: Redo your Calculations: Consider modifying the loan amount, length, or down payment to find a more manageable payment if the predicted monthly payment is too high or you think you can pay more. To identify the best solution, play around with different scenarios using the calculator.
• Step 10: Consult a Mortgage Professional: Consider modifying the loan amount, loan length, or down payment to find a more manageable payment if the predicted monthly payment is too high or you think you can pay more. To identify the best solution, play around with different scenarios using the calculator.

Finding out what you can afford is an important first step in the process of buying a house because it is a substantial financial commitment. A mortgage calculator makes this work easier. You may make an informed selection and select a mortgage plan that fits your financial circumstances and aspirations by carefully weighing the aforementioned elements. To ensure a more certain and stress-free decision-making process, use a house loan calculator to your benefit before starting your home-buying adventure.

As a prospective home buyer, it is important to have a few essential tools at your disposal -

1. Area Conversion Calculator: If you are dealing with a seller who is not familiar with converting the land area to square feet, do not stress. Whether they provide the measurements in bighas, acres or hectares, this area conversion calculator will quickly solve the problem
2. Home Loan Comparison Tool: With countless home loan options available, it can be overwhelming to choose the right one. However, our tool will help you compare different loans and make an informed decision
3. Home Loan Eligibility Calculator: Banks use a home loan eligibility calculator to determine how much loan they can offer you based on various factors such as income, loan tenure and savings. It helps you estimate the loan amount you can request from the bank

The Conclusion

A mortgage calculator is a simple yet effective tool to determine your eligibility for a home loan. With so many sites offering mortgage calculators today, it is no big thing to find the one that matches your needs the best. No matter what is the ongoing home loan interest rate, a mortgage calculator would give you a true picture of your eligibility for the same.

FAQs

Q: What exactly is a mortgage calculator and how does it work?

-: A mortgage calculator is an online tool that helps you estimate your monthly loan payment. It takes into account factors such as your loan amount, interest rate and loan tenure. Using this information, it calculates your EMI and shows how much you will need to pay each month

Q: What are the benefits of using a mortgage calculator in India?

-: Mortgage calculators offer a multitude of benefits for Indian homebuyers:

• Affordability Assessment: To assess your affordability, calculate your estimated EMI using your existing income and expenses. This calculation will help you determine the amount you can comfortably borrow
• Loan Comparison: Compare EMI calculations from various lenders to discover the one that provides the most advantageous interest rates and terms.
• Impact Analysis: Experiment with varied loan parameters to understand the impact on your monthly instalments and total loan cost
• Financial Planning: Estimate the total interest payable over your loan tenure to protect your long-term financial obligations. This will help in better financial planning and budgeting
• Informed Decision-Making: They aid in making informed decisions during the entire home-buying process by providing valuable information and data

Q: Are there different types of mortgage calculators available in India?

-: Yes, there are two main types of mortgage calculators available in India:

• Online Calculators: Provided by banks, financial institutions and real estate websites for easy access. They are user-friendly and require basic loan information to generate an estimated EMI
• Mobile Apps: They offer advanced mortgage calculators with down payment, property taxes and potential stamp duty calculation features

Q: Does using a mortgage calculator guarantee loan approval?

-: No, a mortgage calculator estimates your EMI based on your information. It does not guarantee loan approval because factors like credit score, income stability, debt-to-income ratio and property valuation affect approval. However, it helps you assess affordability and prepare for the loan application process

Q: Can I use a mortgage calculator to calculate the total interest paid over the loan tenure?

-: Some advanced mortgage calculators, including mobile apps, have an amortization schedule feature. This feature breaks down each EMI payment, showing the amount allocated to principal repayment and the amount for interest. By reviewing the schedule, you can calculate the total interest paid throughout the loan period

Q: Is using a mortgage calculator safe?

-: It is generally safe to use a mortgage calculator from a reputable source but it is important to avoid sharing any sensitive financial information directly on the calculator platform. Reliable calculators usually only ask for basic loan details and do not require credit card information or bank account details