Home loans are repaid through EMIs. Based on whether you have opted for a fixed or floating interest rate regime, your EMIs will either remain constant or change with time. During the early years of one's loan tenor, the interest component of one's loan EMIs is much higher than the principal component. However, as time advances, the interest component of one's home loan goes down and the principal component.
Understanding how repayments are made and affect your loan repayments and the pending amount due, it is important to understand the concept of the loan amortization schedule. Loan amortization is a tabular representation of how many payments or EMIs have you already paid towards your loan account or loan amount and what remains to be repaid. A home loan amortization calculator is an online tool that lets home loan applicants calculate how each EMI payment will affect the remaining loan amount and the payments they will have to make each month.
The home loan amortization calculator is an online tool that lets home loan applicants avail of their amortization schedule even before applying for the loan. The home loan amortization calculator works on three details: home loan amount, loan tenor and rate of interest. Once a borrower enters these details, the home loan amortization calculator gives borrowers the loan EMIs they will have to pay, the total interest they will have to pay on their loan and the amortization schedule. Thus, other than giving borrowers the amortization schedule, the home loan amortization calculator helps borrowers understand what combination of loan tenor and loan value would be correct for them.
Let us now look at the benefits of a home loan amortization calculator and some of the reasons why you must use this calculator.
Benefits of a Home Loan Amortization Calculator
- The biggest benefit of a home loan amortization calculator is that it allows home loan borrowers to know how much principal they will need to pay at the end of each month. Thus, a home loan amortization calculator helps borrowers be better planned.
- This online tool also helps borrowers figure out the ideal time for loan prepayments. Prepayments are an ideal way to reduce your loan amount and become debt-free quickly. However, for prepayments to prove the most beneficial, borrowers must time them well. Ideally, borrowers must make prepayments when a considerable portion of their loan is yet to be repaid. By looking at the amortization schedule, home loan borrowers can decide the best time for loan prepayments.
- A home loan amortization calculator also helps borrowers figure out the best time for home loan balance transfers. Home loan balance transfer refers to the facility that home loan borrowers can use to transfer their loan from their current lender to another in return for better loan terms and conditions. The amortization schedule offered by home loan amortization calculators also helps borrowers plan home loan balance transfers in a better way.
- Lastly, by looking at the home loan amortization schedule, home loan borrowers get a clear understanding of how much equity they have built in their home through their home loan. Thus, the information provided by a home loan amortization calculator helps borrowers calculate their asset value correctly.
In conclusion, this online tool makes the lives of borrowers much easier. Therefore, every home loan applicant must make this powerful tool a part of their home loan journey.
