How Home Loan Interest is Calculated

How Home Loan Interest is Calculated

Home loan interest is the additional amount that you have to pay on the principal amount of your home loan as interest. How home loan interest is calculated in India are offered with two types of interest rates:  1. Floating: In which interest varies over a period of time

 2. Fixed: where the interest is constant for the tenure of loan.

Home loan borrowers must make sure to calculate equated monthly installments (EMI) as it provides a clear idea of how much a person must pay in EMIs (Equated Monthly Installment) each month. Calculating EMI allows you to make an informed decision about how much you have to pay each month so that a monthly expense can be planned accordingly. The home loan EMI calculator calculates your EMI instantly on your prospective loan amount, interest rate, and loan tenure. The home loan interest rate is calculated based on several factors and understanding them can be helpful before you apply for a home loan. These factors include Repo rate, Credit score, Type of interest rate, and Loan tenure.  

All these are the primary factors for calculating the home loan interest rate by banks in India, there can also be additional factors. Such as, your relationship with your bank could also help you get a lower interest rate or better loan terms. Banks tend to have discounted interest rates for customers of distinct categories. You can also use a home loan calculator online to get an idea of the housing loan interest rate that you would be eligible for by entering basic details. Using a home loan calculator will give you an approximate idea of the cost of borrowing and this could help you plan your home buying budget and your finances.