Home loan is the most common method used by people to buy property. The house loan can be repaid in equated monthly installments for up to 30 years. However, it is important to choose a lender with reasonable interest rates.
A homeowner can refinance a mortgage to take advantage of cheaper interest rates, smaller monthly payments, or to switch to a new type of loan. After all, home loans can be a useful tool to help people achieve their housing goals, manage their finances, or invest in real estate. The borrower should be aware of the EMI options available. There are generally two types of EMIs: Pre-EMI and Full EMI.
Pre EMI
Only the interest charged on the loan is known as Pre-EMI. This amount is paid during the construction of the building or residence. The Pre-EMI amount is less than the total EMI amount as only the interest portion of the EMI is paid and the principal loan amount is not affected. Pre-EMI period is not included in the loan tenure.
When should one choose the Pre-EMI option?
When there is not enough money to cover both the rent and the loan repayment EMI, one should opt for the pre-EMI option. Owners can also decide whether they want to sell the property immediately after construction or after a few years.
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Full EMI
The total EMI payment for a home loan consists of both principal and interest installments. This payment will start as soon as the house or building is ready. Some banks also allow commencement of full EMI payment when the loan amount is disbursed in instalments.
What is the difference between Full EMI from Pre EMI options?
| Full EMI | Pre EMI | |
| loan disbursement | The full-EMI option is often used when the entire loan amount is to be disbursed in one go. | The Pre-EMI option is used when the loan amount is to be paid back in instalments. |
| interest rate calculation | For full-EMI option, the interest is based on the principal loan amount | For the Pre-EMI option, the interest is calculated based on the loan amount given to the builder. |
| loan repayment time | Loans are settled more quickly. | Payment will be made every month. |
| EMI payment | Monthly payment for Pre-EMI option starts as soon as construction starts. | For the full-EMI option, EMI payments do not start until the property is completed and in your possession. |
questions to ask
Q1, What are the two types of EMI?
Advance EMI and Outstanding EMI
Q2 Can a loan be transferred to another bank?
Yes, the loan can be transferred to other banks.