Is Housing Loan EMI Calculator Accurate?

Yes, it is accurate. You don’t need for the article to say that. But, the more pertinent question underneath is more complex. “Is EMI calculator for home loan accurate enough to base vital financial decisions?” Precise home loan EMI calculations are crucial for your monthly cash flow as well as a long-term financial well-being. Home loan EMIs, at the end of the day, are a major part of your monthly expenses. Therefore, it should neither be too less nor too much. But, home loan EMI calculations with housing loan EMI calculator are not accurate enough for significant financial decision. Here are three important reasons.

Reason#1 – Principal amount can be wrong

Principal amount is a highly complex amount. It has several components. Typical borrowers cannot take all of them into account while considering them for a calculation. In other words, most borrowers understand that processing charges are a part of the principal amount. But, they cannot calculate stamp duty, legal fees and other expenses accurately. They are a substantial part of your principal amount. You cannot calculate your home loan EMI accurately without a precise principal amount. The housing loan EMI calculator is not at fault per se. But, it is useless nevertheless if your EMI can take a major upswing because of these additions into your principal amount.

Reason#2 – Interest rate may vary

A typical borrower considers the advertised home loan interest rate for calculations. It can be detrimental to fiscal well being because home loan is a personalized financial product. If an applicant receives the home loan offer, then it will be based on one’s financial and professional credibility and ability to make repayments. Lender will include several factors in home loan EMI calculations. For example, credit score, current employment stability, and asset to liability ratio, etc. But, if it is slightly higher than the one you considered, it can be disadvantageous offer. In this case too, EMI calculator for home loan is not at fault. You need the realistic home loan interest rate to begin with.

Reason#3 – Repayment options cannot be included

Most borrowers believe in their chances of getting an increment over a period of time. Businessmen can generate higher turnover. On the other hand, salaried people can shift to a better paying job or receive a promotion too. In such cases, they want to consider several repayment options. Housing finance companies offer different options. For example, step-up repayment option or balloon repayment option, etc. EMI calculators for home loan cannot demonstrate the effect of a chosen repayment option on EMI. You need to find the formula and calculate home loan EMI separately.

So, consult a personal finance expert or your housing finance company officer for most accurate EMI.