Costs Associated With A Home Loan

Home loans being a long term debt provides loan takers with an option on the type of interest rate that can be charged on the value of the loan. 

The two types of Home Loan Interest Rate are -

• Fixed Interest Rate : 
  A fixed interest rate remains unchanged over the loan term, resulting in a consistent home loan EMI. When the present home loan rate of interest is shallow and an upward trajectory is expected in the future, it is best to apply for a home loan at a fixed rate of interest. However, with the recent trend of lower mortgage rates, banks offer consumers the option of switching to variable/floating home loan interest rates after a certain amount of time has passed.
  
  
• Floating Interest Rate : 
  A floating interest rate, also known as a free rate of interest, is based on actual market lending rates, which fluctuate over the term of the loan. The EMIs on a home loan may rise or fall in response to interest rate changes. With the recent pattern of lower mortgage loan rates, potential home loan applicants will benefit from applying for home loans with a floating rate of interest.

All banks and NBFCs offer home loan deals which might seem more impressive than the last one. It is essential to understand some details about the method of calculation of home loan rate of interest.

• Flat Rate Method : 
  In this method, interest is measured on the principal sum lent by the lender at the outset. This means that even after ten years of debt forgiveness, interest will be calculated on the same principal balance, causing you to pay more interest. This way of calculating interest is often used in microfinance.
  
  
• Reducing Balance Method : 
  When you pay an EMI, you pay a portion of the total as principal and the remainder as interest on your loan. Over time, the remaining principal balance is reduced. Lenders measure interest based on the lowered unpaid balance. You incur less interest in this form when the principal outstanding falls as you pay the loan EMI.

The procedure for reducing the balance can be yearly, weekly, or constant. For mortgage loans, banks use the regular reducing balance formula to quantify interest. Some mortgage financing providers, on the other hand, calculate interest on a home loan using the monthly form. In general, home loans are long-term loans, so it's crucial to find out the total interest obligation upfront. 

Either of the two methods mentioned below can be used to measure the same -

EMI Tracker : 

You should use a home loan EMI calculator to figure out how much interest you'll pay on your loan. 

You'll need to fill in the fields on the calculator with the following information :-

• Loan Repayment Amount of Home Loan 
• Interest Rate 
• Tenure of the loan 

After you've entered your details, press the 'Calculate' button to see a full breakdown of your debt, including the sum owed in interest.

EMI Calculation Formula : 

EMI = [P x r x (1+r)^n]/[(1+r)^n-1]

P is the principal, r is the interest rate, and n is the number of instalments or the loan term in months.financial organisations including banks in India provide residence loans to befitting applicants and earn in the form of interest that accrues on the loan.

One of the leading home loan's providers in the public sector is Syndicate bank. Syndicate bank has a vast and loyal clientele. Some customers have been using the bank's services for more than years. The reason for this customer preference is the excellent customer relations and consumer-friendly deals on debt and other banking services provided to them. Syndicate bank home loan is quite proffered by customers due to the ease of serviceability and no-hassle EMI payment options of the bank.

Also read this: Repayment options in Home Loan