Calculating Property Loans: A Handy Calculator Overview

Property loan calculators, also referred to as mortgage loan calculators, are online tools that property loan applicants can use to calculate their loan EMIs for their desired combination of loan value and loan tenor. Before we discuss more about these tools and how to use them, let us establish the basics of property loans. 

Property Loans Explained 

Property loans, also known as loans against property or mortgage loans, are loans sanctioned against a property as collateral. Commercial and residential properties are the most acceptable forms of security for these loans.
However, some lenders also sanction loans against land. The property that a borrower pledges as collateral must be in the loan applicant’s name. If the property has more than one owner, all owners must sign the mortgage loan application form.
Once a borrower pledges their property as security, they have to repay the loan amount in the form of affordable EMIs spread over a loan period that the borrower chooses. If the borrower defaults on loan repayment for an extended period, the lender can sell the pledged collateral to recover losses.
In this case, the lender must keep the remaining loan amount along with interest and return the amount remaining from the sale of the property to the borrower. 

Since mortgage loans are backed by collateral, they attract a nominal rate of interest. Borrowers have the flexibility to choose their loan tenor. Lenders place no restrictions on how the borrowers can use the loan money.
Further, in some specific cases, loans against property can help one claim tax benefits and reduce one’s tax liability. These factors make property loans one of the most popular financing tools today. 

Property Loan Calculator: What is it and How Does it Work? 

A property loan calculator is an online tool that loan applicants can use to calculate their loan EMIs, the interest they will have to pay on their loan and the total cost of borrowing money. Using the property loan calculator is fairly easy.
Here’s how you can use this calculator for loan planning.

1. Enter the loan amount that you wish to avail yourself of. Try and keep the LTV ratio low to keep EMIs economical and nullify the chances of a loan default. 
2. Enter your desired loan tenor. If you opt for a very long tenor, your EMIs will decrease but the overall interest payout on your loan will increase significantly. On the other hand, opting for a short tenor can lead to unaffordable loan EMIs.
   Therefore, one must choose one’s loan tenor carefully and after taking into account one’s income, other existing EMI obligations and repayment capacity. 
3. Lastly, enter the best or the lowest interest rate you are being offered by a lender. 

The property loan calculator requires only these three details to produce results. Alongside one’s EMIs, interest outgo and total cost of borrowing money, the mortgage loan calculator also provides a detailed amortization schedule.
This schedule can help borrowers understand how each EMI they pay is being divided to cover the principal and interest components of one’s home loan and how much principal is yet to be repaid at the end of each month. 

The property loan calculator is an important tool. In the next section of this article, we discuss why.

Benefits of a Property Loan Calculator 

1. A property loan is a huge responsibility. By sharing with loan applicants their loan EMIs, a property loan calculator helps them be better prepared. Applicants can do budgeting and monthly planning in such a way that they can comfortably afford their new loan EMIs.
   Thus, a property loan calculator saves borrowers from making any mistakes related to overestimating their repayment capacity and then defaulting on loan repayment. 
2. Individuals who want to repay their loan before the agreed loan tenor must make prepayments whenever possible. Prepayment refers to lumpsum payments made towards one’s loan account.
   This helps reduce the principal amount, thereby helping people become debt-free sooner. However, prepayments prove most beneficial when a loan borrower opts for them during the early stages of one’s loan tenor when a considerable portion of the interest is yet to be repaid.
   The same goes for foreclosure, which is essentially the process of repaying the entire amount due and clearing one’s home loan. The amortization schedule provided by the mortgage calculator can help loan borrowers figure out the most ideal time for making loan prepayments or opting for foreclosure. 
3. The amortization schedule provided by property loan calculators can also help loan applicants identify the most lucrative time for making prepayments. 

Final Words 

A property loan calculator is a highly beneficial tool. It can make loan application and repayment planning much simpler. The best part is that the calculator is free to use. So, use it if you are planning to avail yourself of a loan against property.