Home Extension Loan Calculator

Home Extension Loan Calculator   

You may feel the need to make home extensions due to changing family dynamics, or because you'd like to increase the value of the property, meet new local regulations, or avoid relocation. In either case, no one wants to be too sparing with home extensions and end up cutting too many corners. That said, it may not be to finance home extensions on your own. especially if your family relies on your savings for future education expenses or medical expenses.   

          
By taking a loan for such purposes, you can keep your savings for other purposes. This article explores what home extension loans are, how to use a home extension loan calculator to understand loan EMIs, and plan your finances. 

What Is Home Extension? 

Any modifications you make to your residential property after the construction has already been completed is called home extension. Typically, home extensions involve the creation of rooms, floors or new structures. Following are some examples of home extensions:   

1. Adding a porch 
2. Building a new standalone shed or garage 
3. Extending the living room 
4. Adding a room for worship 
5. Adding a new bedroom 
6. Adding a new floor 

What Is a Home Extension Loan? 

A home extension loan or a home addition loan is a type of secured loan taken against your property. The interest rates on home extension loans are similar to home loans themselves. Typically, you can get a home extension loan for up to 90% of the property value. This is a long-term loan as the tenure can be as long as 20 to 30 years. 

What Is a Home Extension Loan Calculator? 

A home extension loan repayment calculator is meant to make it easy for you to compare different interest rates and tenures. It calculates your EMI for the home extension loan and also tells you how much interest you would be paying. 

How Do Home Extension Loan Calculators Work? 

Home extension loan calculators or home addition loan calculators like all calculators have a formula, inputs and outputs. The inputs in this case are the principal amount, interest rate and tenure or the number of years you plan on borrowing for. The outputs of the home extension EMI calculator will be the EMI amount and the total interest paid. 

If you are worried about the interest amount you pay during repayment, home extension loan calculators can help you with that as well. 

Formula for Home Extension Loan Calculation 

EMI = P X R X (1+R)N/[(1+R)N-1] 

Where, 

P = Principal amount 

N = Number of months in loan tenure 

R = Monthly interest rate 

You can get the monthly interest rate by dividing the annual interest rate by 12. 

How to Use Home Extension Loan Calculators? 

You can use a home extension loan interest rate calculator through the following steps: 

1. Enter the required amount as the principal 
2. Enter the number of years you plan on borrowing the principal amount for 
3. Enter the interest rate 
4. Click on ‘Calculate’ and view your monthly EMI and total interest to be paid 

Understanding How a Home Extension Loan EMI is Calculated 

Based on the formula shared above, all you need to find your monthly EMI on a home loan extension are the principal amount, interest rate and tenure. 

Suppose you require a loan for ₹10 lakh for 5 years and a lender will give it to you at the interest rate of 12% p.a. The first step is to convert the annual figures into monthly figures. 

So now, 

N = Tenure in months = 5 X 12 = 60 

R = Monthly interest rate = 0.1 / 12 = 0.0083 

And you already knew, P = Principal amount = ₹10,00,000 

So, EMI = ₹10,00,000 X 0.0083 X (1+0.0083)60/[(1+0.0083)60-1] 

  = ₹8,333 X (1.0083)60/[(1.0083)60-1] 

  = ₹8,333 X 1.65 / 0.65 

  = ₹8,333 X 2.55 

  = ₹21,247.04 

What If You Went for a Longer Tenure? 

Suppose instead of borrowing for 5 years, you borrowed for 10 years. Then, 

N = 120 

R = 0.0083 

P = ₹10,00,000 

So, EMI = ₹10,00,000 X 0.0083 X (1+0.0083)120/[(1+0.0083)120-1] 

  = ₹8,333 X (1.0083)120/[(1.0083)120-1] 

  = ₹8,333 X 2.71 / 1.71 

  = ₹8,333 X 1.59 

  = ₹13,215.07 

However, since you are borrowing for a longer period, you would end up paying more as interest. 

Interest when borrowing for 5 years = 60 X 5-year-EMI - Principal amount 

          = 60 X ₹21,247.04 - ₹10,00,000 

          = ₹2,74,822.68 

Interest when borrowing for 10 years = 120 X 10-year-EMI - Principal amount 

=120 X ₹13,215.07 - ₹10,00,000 

= ₹5,85,808.84 

So, the interest paid on the 10-year loan is higher. 

Now, let's see a few variations of principal amount and tenure at a 10% p.a. interest rate and see the interest paid and the EMI. 

Benefits of Home Extension Loan Eligibility Calculator Online

Here are the key benefits of using a home extension loan repayment calculator online:  

1. Planning Your Expenses

Although home extensions are not as expensive as building an entire home, they can still be quite costly. It is important to ensure that you can make repayments in time before availing the loan. By using an  EMI calculator for a home extension loan, you can calculate your EMI expenses and plan your cash flow more effectively.

2. Saves Time

The Shriram home extension loan EMI calculator is a powerful tool. Not only is it faster than humans, but it also has an edge over spreadsheet applications in terms of convenience as you do not need to write formulas on your own. Thus, by using a loan for a home addition calculator, you can save time and get accurate results.

3. Helps Decide the Principal Amount

One way to minimize your interest costs is to simply take a smaller home extension loan for a smaller period. You can experiment with different tenures, interest rates, and principal amounts on a home extension loan interest rate calculator. You may choose how much of the home extension you want to fund through a loan and from your savings by understanding the cost of different principal amounts. Similarly, you can also optimize tenure through experimentation.

4. Optimise Your Tax Benefits

Principal repayment on home extension loans are eligible for deduction up to Rs. 1.5 lakh per annum under Section 80C and interest payments are eligible for deduction up to Rs. 2 lakh per annum if the home is self-occupied and without any limit if the home is let out on rent under Section 24.

Conclusion

You may need to make home extensions such as adding a garage, a new room, or a floor for various reasons. If you are unable to finance these expenses on your own, you can rely on a home extension loan. To calculate how much a home extension loan EMI would be and to try out different combinations of tenures, interest rates, and principal amounts, you can use the Shriram Finance Home Extension Loan Calculator and make an informed choice. This helps you save time, plan your expenses, decide the principal amount, and optimize your tax benefits.