Excited to own your first home? This elation may fade when you realise you have to know
how to calculate housing loan monthly installment.
The good news is that it’s not that daunting. In fact, it’s pretty simple when you enter all the main factors like the loan amount, the loan period, etc.
The results you get from the calculation give you a clear understanding of your capabilities and limits on a housing loan.
How to calculate housing loan monthly installment can be understood better by looking into other factors such as mortgage installment, understanding how much mortgage you can afford, learning how to use the mortgage calculator, etc.
How Much Loan Can You Borrow For Your New Home?
In most cases, you should be able to get a loan of at least $100,000 from a lender. In the case of a bank loan, you get the maximum home loan depending on how many housing loans you already have.
For a HDB concessionary loan, you can take up to 80% of the total buying price of your property. For a bank loan, you can get an up to 75% of the price of your property, or 45% for your second property, or 35% for your third home.
The loan amount for your new home mainly depends on personal income, total debt servicing ratio (TDSR), loan-to-value (LTV) ratio, personal debt commitments, etc.
You can also use a TSDR calculator to know how much loan you can take based on your monthly salary. The TDSR limit is 55%, which means your monthly debt repayments cannot exceed 55% of your monthly salary.
How Much Mortgage Payment Can You Afford?
A general guideline to this rule is that your mortgage should be about 2.5 times of your annual gross salary.
For instance, if your annual salary is $200,000 in a year, a loan of $400,000 to $450,000 will be the suggested mortgage amount.
You should always go back to the question of how to calculate housing loan monthly installment since a mortgage calculator shows you an estimation of what you can afford. Also, ensure you consider how much you can repay using your monthly income carefully.
What Is A Mortgage Repayment?
A mortgage repayment is the monthly payment you make for your home loan. The mortgage loan you take from a bank when you purchase your house requires you to repay it monthly for a certain agreed amount of time.
You pay the agreed amount until the principal loan and interest are back in full to the bank. The mortgage balance reduces as you make your monthly payments to the end of your loan tenure.
Your age determines the loan term; the younger you are, the longer the loan term.
Regulations in Singapore have put the maximum loan terms for a HDB flat as 30 and private properties as 35 years.
Note that the first repayments are for interest. Therefore, if you decide to sell your property after several years, the amount will be almost the same.
That’s why taking a mortgage loan isn’t a rash decision. Speak to a trustworthy moneylending company like U Credit for more loan expertise.
How To Calculate Housing Loan Monthly Installment
You use a monthly installment calculator to determine the monthly installment you should pay for your housing loan.
To get the answer to how to calculate housing loan monthly installment, go ahead and input your figures in the single or both columns.
According to the CPF Board, the calculation can go two ways.
Key in the loan amount, the repayment tenure, and your interest rate in the given space
Key in the loan amount, your repayment time, and the interest rate in the space given for better comparison
|Repayment Tenure (In Years)
Then press the “calculate” button.
After keying these numbers into the calculator, your results should present in a table for you to go through.
If not, the information can get hard to understand all the numbers provided. To fully understand how to calculate housing loan monthly installment, you should understand the information better.
Here are a few key variables you should understand.
1. Monthly Installments
You should change the monthly installment agreements according to the annual interest rate changes. This adjustment contributes to the repayment of the original amount and interest portions to which payments are made.
2. Loan Amount
Your housing loan amount is made by mortgage bankers who understand all the details surrounding your income. Loan amounts depend on different factors, for example, the ability to repay your bank.
The mortgage bankers help you understand your loan amount using a housing loan calculator. The calculator also helps you understand the full details of a housing loan.
3. Loan Tenure
This is the amount of time given to repay a loan. The loan tenure is normally presented in years. For instance, the initial loan tenure of five years is the same as 180 months.
4. Interest Rate
It’s a major factor in deciding monthly installments. The interest rate can cost you tens or hundreds of thousands for the whole loan amount.
There is also something referred to as an origination fee – it’s usually put into your loan balance for a lower interest rate.
The fee has a downside, though. It’s not a great idea since you can’t get it back regardless of when you finish paying the mortgage.
Calculating A Monthly Housing Payment
The formula is usually M = P [i(1+i)^n]/[(1+i)^n-1]. The variables in the formula are the total loan amount you’ve taken, the interest rate of the loan, and the period you have to repay as whole.
How To Calculate Monthly Loan Installment
The equation of how to calculate housing loan monthly installment is referred to as Equal Monthly Installment (EMI) formula. It’s known as Monthly Repayment = P (r(1+r)^n)/((1+r)^n-1).
What Is The MSR?
The maximum is 30% of your gross monthly salary. The Mortgage Servicing Ratio (MSR) is the part of your gross monthly salary used to pay any property loan you have, including the current one you’re applying for.
How To Use A Mortgage Calculator
When using a mortgage calculator, you need to input the following details:
- The type of property you’re calculating a home loan for
- The building status of your property
- The loan amount
- The agreed interest rate
- The loan tenure
- Finally, hit the calculate button
The important thing is to understand the terms of numbers you will key in – for example, the interest rate, taxes and insurance, loan tenure, amortisation, principal amount, monthly installments, and loan balance.
Banks use a mortgage calculator to assist you in understanding the details contained in a house loan.
As the calculator assists in how to calculate housing loan monthly installment, you also learn how to plan your income to repay the loan easily.
Also, the calculator shows your payments with amortised schedule breakdown. A good mortgage calculator should help you add loan amount, tenure, and interest rates for about five years.
Calculate Your Housing Loan Monthly Installment
The last step is always to hit the calculate button after you’ve entered the required information in a mortgage calculator.
The mortgage calculator gives its answer as options of the house loans you can take. You can choose your best loan option according to your income.
Our loans are easy to apply, quick, and flexible, so contact us now.