The nuances of Home
Loans explained
Buying your first house ever? If you have fluttering
butterflies in your stomach, chances are, you’re already on the right path. For
a new home owner walking this path, there are a lot of things which need to be
taken into consideration. Right from short listing the bank with the lowest home
loan interest rate to calculating the home loan EMI, there are a lot of steps
which need to be considered before taking the plunge.
What has changed over
the years?
People might ask, what has really changed over the years,
when it comes to getting a home loan? The changes might not seem too obvious;
however, different banks like SBI, HDFC, ICICI etc. have made the choices
easier for their customers. Right from taking loans to calculating the home
loan EMIs on specialized home loan calculators, everything is available on the
Internet these days.
For a new home owner, stepping out of their house is no
longer a necessity. All you have to do is sit at home, open your Internet
browser and start searching through potential loan options, the banks as well
as the interest rates they are offering. The lowest bidder gets the customer’s
attention as well as the approval.
How do banks
calculate the EMI rate?
You don’t really need to be a math guru to understand the
functioning of the loan calculator. However, many people like to know the
calculations, so here goes:
Where:
E = EMI amount
P = Principal Loan Amount
R= rate of interest which is calculated on a monthly basis
N = duration of the loan, converted into months
Every bank offers a different rate of interest, depending
upon their charges and their policies. Depending upon the rate of lending by
RBI as well as the inflationary rates, these banks decide and update their
interest rates, which are further passed on to the customers in the form of
interest payments.
However, the fluctuating rates of interest are a deadly
weapon which is often used to dupe customers to sign up for the home loan. In
case you are buying a house for the first time, it’s imperative to seek the
help of someone knowledgeable, who has already invested in a house, or
possesses some knowledge about banks.
