The average rate of home ownership in America is around 64%. US states in Mid-western area have higher percentage of home ownership when compared to home ownership percentage in Western states. When you are thinking of undertaking a mortgage home loan to buy your family home, you have to pay considerable attention to Interest Rates For Home Loans. Nowadays home loans are devised to meet the needs of every home owner and sometimes are customized also. Here as a home loan owner you should be able to identify how much of EMI can you undertake on a monthly basis.
What do you understand by an EMI?
EMI or equated monthly installment is paid by the borrower each month. The EMI is based on the interest rate and the duration for which you have the loan. Most monthly EMI’s are deducted directly from your bank account on a specific day. The monthly EMI’s are undertaken till you have paid up tour entire home loan and the interest rate for home loan.
How do you derive the breakup of the EMI?
The amount that you have to pay for your EMI would depend on the interest rates that you are paying for your home loan and the principal interest. At the beginning of the home loan payment, the borrower would need to pay the interest rate of the loan. When the loan matures after some years and the principal amount gets paid off, then the house loan outstanding would be much lesser. Gradually the interest rate amount in the EMI becomes lesser when compared to the principal amount. In some cases the EMI would be much lesser and these instances are:
• When you as a borrower pay a large outstanding amount and then the Emi gets adjusted in the remaining balance. Here the borrower would receive the option of minimizing the loan period or paying a lower EMI.
• According to the market current rates, the rates of the floating fixed rates would determine the EMI.
What are the factors which determine the EMI?
The interest rates for home loans determine the EMI that a borrower has to pay. The calculation of the EMI is based on a few important factors which are:
Principal Amount- This is the amount which is borrowed by the home owner. It determines your monthly EMI.
Interest rate- The interest rate that you pay on your total home loan would also indicate on your EMI payment. When you have a high rate of interest on your loan you would pay a high EMI. Here when you take a new mortgage loan, you should study various vendor rates and decide the best for yourself.
Loan duration- The period for which you have taken the loan would determine your EMI. The longer loans have lower EMI.
What is the computation method?
Different methods are used to calculate the EMI. Some of them are:
• Annual-reducing method- Here the calculation of the EMI is made at the end of the year and is calculated on principal amount and interest rate.
• Monthly-reducing loans- Here the calculation is based on reduction of principals, when the EMI is cleared by the borrower every month.