Being a property owner is one of the greatest accomplishments in life as it provides emotional as well as financial security to an individual. While living in your house is in itself considered a blessing in the modern world, the property can also be used to obtain a substantial amount to glide over financially tough times. Although there are various ways available in the market to accumulate funds these days, obtaining a loan against property (LAP) from banks is still regarded among the most secure ones.
Offered at a reasonable interest rate and long repayment tenure, a LAP or home mortgage loan is provided to an individual upon pledging a residential or commercial property as collateral. A quick and efficient method to acquire monetary funds without any hassle, a home mortgage loan should be availed while keeping in mind your EMI affordability. As the charged rate of interest depends upon the credit score and property type, you should calculate the monthly installment amount with the help of a property loan EMI calculator beforehand to avoid any mix-up later.
Read on to know in detail about computing the LAP loan EMI.
An assessment tool to plan your finances in advance, the EMI calculator provides a break-up of the total loan repayment in the form of an amortization schedule. A reliable and easy-to-use tool, loan against property EMI calculator is available for free online to help you in computing your EMI amount based on various loan parameters such as loan amount, interest rate, and repayment tenure.
The EMI amount is usually calculated as per the following formula:
EMI = P × r × [(1 + r) n/ ((1 + r) n – 1)]
The three factors used in the above equation are:
- Principal loan amount (P) – Offered up to 60% of the market price of the property, the principal amount varies depending upon the property valuation performed by the bank’s executive. A property is generally evaluated based on its location, age, size, and occupancy status. The greater the loan amount, the larger will be the EMI amount as per the calculator.
- Loan tenure (n) – Inversely proportional to the EMI amount, the tenure of a LAP depends upon the age of the borrower and their remaining years of service. The longer the tenure opted by the borrower, the lesser will be the computed EMI amount. The tenure must be selected upon extensive research upon assessing your fixed monthly expenses as it will directly affect your timely EMI payments.
- Interest rate (r) – The most critical factor in determining the EMI amount, the interest rate can be fixed or floating. Directly proportional to the EMI amount, it is levied by the lender based on the borrower’s credit score as well as the type of property to be pledged as collateral. A higher interest rate could decrease your chances of availing a large principal amount and longer tenure. Hence, apply for a loan against property with an excellent credit score to obtain a low rate of interest.
Hence, you must use a property loan EMI calculator as it saves time and provides accurate results that help in effective financial planning while taking a home mortgage loan.