Certain factors have a direct impact on the home loan EMIs that an individual must pay each month, and the most important of these factors is the home loan interest rate. Lenders determine the interest rate on the principal amount based on several factors, such as the individual’s income, age, job stability, and FOIR. The Home Loan interest rate determines the total cost of borrowing funds.
Building and maintaining a CIBIL score above 750, opting for a low LTV ratio loan, maintaining one’s FOIR below 30% and ensuring job and income stability are some of the simple things borrowers can do to secure themselves a low home loan interest rate. Home loan balance transfers and home loan prepayments are other simple ways in which a homebuyer can reduce the total interest payout.
Prepaying a home loan means paying off a part or the entire outstanding loan amount before the scheduled tenor. This can be done either in a lump sum or through additional payments on top of the regular EMIs. Prepaying a home loan can help borrowers reduce the total interest payable and shorten the loan tenor, offering potential savings and quicker debt resolution.
The home loan prepayment calculator is an online tool that lets borrowers calculate the impact of a prepayment on one’s EMI, total loan payout, and the total cost of borrowing funds. Home loan part-prepayment calculators are online tools that are fairly easy to use and are also free to use. These tools also ask loan applicants for only a few simple details, such as the total loan amount that remains to be repaid, the number of years the loan borrower has to repay the loan and the rate of interest at which the loan borrower is repaying the loan.
If you are using an elaborate home loan part prepayment calculator, you will be asked to choose whether you want your home loan prepayment to affect your loan EMIs or the loan tenor you have opted for. If you choose to have your home loan prepayment affect your home loan EMIs, the calculator will show you your current EMI, your new EMI and how much will your EMI reduce if you do decide to opt for a home loan prepayment.
The home loan prepayment calculator will also show you the total money you will save on the total interest payout on your loan if you decide to go for a home loan prepayment. Many people choose to go for a home loan prepayment not just to benefit from a lower loan tenor and become debt-free sooner but also to potentially reduce the overall cost of their loan, including the home loan processing fee. Within the home loan prepayment calculator, if you choose to have your home loan prepayment affect your home loan tenor, the calculator will give you the number of months by which your EMI will reduce if you do decide to make a prepayment.
The home loan prepayment calculator is a very important tool. For those home loan borrowers trying to become debt-free quickly, the home loan prepayment calculator can help understand the loan amount that one must prepay to shorten the loan tenor to their desired number of years. Similarly, a home loan prepayment calculator can also help home loan borrowers decide the prepayment amount to be made to help bring loan EMIs within the affordable limit.
If you are planning to prepay your home loan, keep in mind that fixed-interest-rate home loans attract a prepayment and foreclosure fee. As per the latest guidelines, floating-interest-rate home loans can be prepaid at any point in the home loan journey at no additional fee or charge. Further, home loan prepayments help borrowers save maximum interest when opted for during the early years of one’s home loan life. Each home loan EMI that an individual pays is divided into two parts. Your lender will divert the first part of the home loan EMI towards the repayment of interest and the second part of the EMI will go towards the repayment of the principal part of the loan.
During the first few years, lenders focus entirely on recovering interest and consequently the majority portion of one’s home loan EMI is diverted towards the recovery of interest. Individuals opting for a home loan prepayment to reduce the interest payout and the total cost of borrowing funds must always choose to go for this option during the early years of their loan’s life or when the majority component of their home loan EMI is diverted towards the repayment of the interest component of the home loan. Borrowers must also negotiate on the home loan processing fee and other charges to keep the cost of borrowing money low.