Knowing the monthly installments for a mortgage loan is easy, but it is difficult to understand the technicalities of the interest on mortgage loans. Fortunately, several online calculators allow an individual to avoid the hassles of manual computation. Nevertheless, it is a good idea to understand the basics of a mortgage interest rate.
Keep reading to know more about the same.
What is a mortgage loan interest?
A mortgage or loan against property interest is the amount of money a borrower pays to a financial institution for the fund. When a borrower starts making repayments of credit, most funds are utilized to pay the interest. As one approaches the end of the repayment tenor, the repayments are utilised towards the borrowed loan amount.
Financial institutions in our country offer two types of interest rates on mortgage loan one is fixed and another is floating interest rates. Willing borrowers should know the difference between these fixed and floating interest and opt for the one that meets their financial requirements.
Fixed interest rate: Here, the rate of interest remains fixed throughout the repayment tenor. Hence, a borrower has to pay the interest at a rate pre-decided by the lender.
Floating interest rate: A floating interest rate keeps changing with market fluctuations. The rate of interest changes in case the RBI decides to make a change in any economic factor affecting the same.
How to calculate the monthly instalments per the interest rate charged by the lender?
One can use a loan against property EMI calculator to know their monthly pay-outs per the interest rate charged by their lending partners. This online EMI calculator is very easy to use and offers prompt results without errors. Borrowers can check their monthly instalments by using this tool that works on the following mathematical formula:
EMI= [P x R x (1 +R) ^ N] / [(1 + R) ^ N-1]
In this formula:
P- Denotes the principal amount
R- Denotes the rate of interest charged by the lender
N- Denotes the repayment tenor in months
The monthly pay-outs tend to change if any of these variables change. Further, one can use this free-to-use tool as many times as they way until they get their desired results.
How to use a property mortgage loan EMI calculator?
Calculating the monthly instalments before applying for a loan against property can help you plan your monthly expenses without any financial burden. You can follow these simple steps to know your monthly pay-outs on your LAP:
Step 1: Visit the official portal of your preferred lending partner.
Step 2: Look for the option of loan against property EMI calculator.
Step 3: In the tool, enter the principal loan amount or use the slider to adjust the amount per your requirements.
Step 4: Enter the interest rate charged by your chosen lender and then, provide your desired repayment tenor.
Step 5: Finally, click on ‘submit’ to generate the results.
That being said, there are several other benefits of a loan against the property other than low-interest rates. One such beneficial aspect of this secured loan is the way to avail tax benefits on loan against property An individual can claim tax benefits on the interest paid for a loan against property under Section 37(1) and 24(B) of the Income Tax Act of 1961.
Several financial institutions in India, such as Bajaj Finserv, extend pre-approved offers on their secured and unsecured financial products, such as home loans, loans against property, etc. These exclusive offers streamline the entire loan application process and fasten the disbursal stage. Customers can check their pre-approved offers by entering their names and contact details on the website of their preferred lender. Now that you know how interest on mortgage loans works, you can reap the benefits of this credit facility. First, however, you should remember to borrow only what you need. This will help you avoid credit defaults and keep your mortgaged property safe throughout repayment. Further, knowing how interest rates work will help you plan your credit requirements per your financial capabilities.
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