11 MAY, 2022

Homeownership looks different for different people depending on their age, income, lifestyle, personality, priorities, etc. There is a home for everyone out there and a home loan helps finance that home. What is important to know, however, is your home loan affordability before you start house hunting. Home affordability, in simple terms, is the budget in which you should look at homes and this is determined by parameters such as your income, existing debt, loan tenure, down payment, etc. An easy way to gauge your home affordability is to use a home loan affordability calculator.

What is a home loan affordability calculator?

A home loan affordability calculator is a helpful tool that you can find online on your preferred lender’s website. You need to input details such as your in-hand salary, home down payment, loan tenure, home loan interest rate, etc. Using this information, the home loan calculator gives you a number that essentially estimates the cost of the property you can afford.

Benefits of using a home loan affordability calculator  

Here are some of the most important benefits of using a home loan affordability calculator when applying for a home loan:

  • The first thing a home loan affordability calculator does is that it gives you clarity on what your homebuying budget should be. This is crucial because it helps narrow down your choices and makes the house-hunting process more productive.

  • Another benefit of using a home loan affordability calculator is that it gives you an estimate of how much home loan amount you should apply for. Once you have this number, you can use a home loan EMI calculator and see what your Equated Monthly Instalment (EMI) amount will be.

  • Knowing your home loan affordability and the range of the home loan amount you should apply for reduces the chances of your home loan application being rejected. Lenders are concerned with your repayment capacity and hence only tend to approve loans that the borrower can pay off considering their income and financial obligations.

  • Since a home loan affordability calculator gives you the estimates of what your home budget and your EMI look like, you can undertake the necessary financial planning. Before you take on any kind of debt, it’s essential that you have a solid repayment plan in place and account for the EMIs in your budget. Defaulting on the EMI payment is the last thing you want to do if you can help it.

The bottom line

A home loan affordability calculator helps set the course of your home buying journey, including your home loan process. It allows you to buy a home and finance it in a way that is comfortable for you financially and gives you clarity on all the important numbers. While these are just estimates, they serve as a good starting point. A home loan affordability calculator is the most helpful when you use it along with a home loan EMI calculator.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.