Everything You Need to Know About Home Loan EMIs in Kerala

Home loans changed the face of real estate purchases. Millions of people have purchased their homes through home loans. Banks finance home purchases for home buyers. The loan is paid back to the bank with interest over a period which is a set number of years. The payment is in the form of equated monthly installments, which are calculated by adding the principal amount of the loan with interest and divided into the number of months the payment needs to be made to pay the loan completely.

So here is how it is calculated :

• Principal – The amount borrowed from the bank
• Interest – The interest that the lender applies as a charge for the loan

So the EMI is calculated as

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

Where:

• P = Principal loan amount
• r = Monthly interest rate
• n = Loan tenure in months

Factors Affecting Home Loan EMIs in Kerala

1. Loan Amount: Higher loan amounts lead to larger EMIs.
2. Interest Rate: The interest rate offered by the lender directly affects the EMI.
   • Banks in Kerala and NBFCs provide competitive rates for home loans.
3. Loan Tenure: A longer tenure reduces the EMI but increases the total interest paid.
4. Type of Interest Rate:
   • Fixed Rate: EMI remains constant throughout the tenure.
   • Floating Rate: EMI varies based on market conditions.

Current Home Loan Rates

Kerala’s current home loan rates vary from 8 % to 10 %. The rate is dependent on the lender or bank, the borrower’s profile, the amount, and the tenure.  State Bank of India, ICICI Bank, HDFC bank, etc are some major banks, and L&T Housing, Aditya Birla Capital, GIC Housing, etc are some of the major financial institutions amongst home loan lenders in Kerala.

Tax Benefits

Kerala residents can avail themselves of the following tax benefits under the Income Tax Act:

1. Section 80C: Deduction of up to ₹1.5 lakh on principal repayment.
2. Section 24(b): Deduction of up to ₹2 lakh on interest repayment.
3. Section 80EEA: Additional deduction of ₹1.5 lakh for first-time homebuyers, subject to conditions.

Some Useful tips

1. It is better to plan finances properly before opting for a home loan. It is easier to choose the amount, tenure, and interest if the monthly EMI amount is known.
2. Compare the interest rates, payment conditions, pre-payment penalty, and processing fees and choose the most suitable one.
3. A healthy credit score can ease the process of loan approval. Check you score before applying for the loan.

These are the important factors to know when taking a loan to finance your new home.