When planning to buy a home, one of the crucial factors to consider is the Equated Monthly Instalment (EMI) that you will need to pay for the home loan. EMIs are monthly payments made to repay the home loan and include both principal and interest components. In India, home loan EMIs and interest rates are affected by several factors that borrowers need to understand to plan their finances better.

Six important factors that affect home loan EMIs and interest rates in India:

1. Loan amount and tenure

The loan amount and tenure are the primary factors that affect home loan EMIs. Typically, a higher loan amount and longer tenure will result in higher EMIs. The loan tenure also affects the interest rate, with longer tenures resulting in higher interest rates. To calculate the EMI, borrowers can use a house loan EMI calculator that takes into account the loan amount, tenure, and interest rate.

2. Interest rate

The interest rate is the cost of borrowing and is a crucial factor that affects the EMI. The interest rate can be either fixed or floating, and it varies depending on the lender, borrower’s credit score, and other factors. Borrowers with a higher credit score usually get a lower interest rate, resulting in lower EMIs.

3. Credit score

A credit score is a measure of a borrower’s creditworthiness and is based on their credit history. A higher credit score indicates that the borrower is more likely to repay the loan, resulting in lower interest rates and EMIs.

Borrowers can check their credit scores and report from credit bureaus like CIBIL, Equifax, and Experian. A good credit score is usually above 750.

4. Income and employment

The borrower’s income and employment also affect home loan EMIs and interest rates. Lenders usually prefer borrowers with a stable income source and employment history. Borrowers with a higher income are more likely to get a higher loan amount and lower interest rates.

5. Type of interest rate

The type of interest rate also affects the EMI and interest rate. A fixed interest rate remains constant throughout the loan tenure, while a floating interest rate varies depending on market conditions. Fixed interest rates are usually higher than floating interest rates, resulting in higher EMIs.

6. Down payment

The down payment is the amount that the borrower pays upfront while buying the home. A higher down payment reduces the loan amount, resulting in lower EMIs and interest rates. It also indicates that the borrower is financially stable, reducing the lender’s risk.

About Home loan eligibility

To apply for a home loan, borrowers need to meet the lender’s eligibility criteria. The eligibility criteria vary depending on the lender and usually include factors like age, income, credit score, and employment history. Borrowers can check their home loan eligibility using an eligibility calculator available on the lender’s website.

Details of Housing finance

Several lenders offer housing finance in India, including banks, Non-Banking Financial Companies (NBFCs), and Housing Finance Companies (HFCs). Borrowers can compare the interest rates and other terms and conditions of different lenders to choose the best option.

Steps for Home loan procedure

Before applying for a home loan, borrowers should check their home loan eligibility, which takes into account their income, age, credit score, and other factors. It is also essential to research various housing finance options and get familiar with the home loan procedure before making a final decision. The home loan procedure involves several steps, including:

• Application: The borrower needs to submit a loan application along with the necessary documents, including income proof, identity proof, address proof, and property documents.

• Verification: The lender verifies the borrower’s credit score, income, employment history, and property documents.

• Sanction: Once the verification is complete, the lender sanctions the loan amount and provides the terms and conditions.

• Disbursement: The lender disburses the loan amount after the borrower signs the loan agreement and provides the necessary documents.

Conclusion

By carefully considering all these factors and using tools like a home loan EMI calculator, borrowers can make an informed decision and choose a home loan that meets their financial requirements. A well-planned home loan can make the dream of owning a home a reality without compromising the borrower’s financial stability.