If you are in the process of building your dream home or are planning to buy one that is under construction. Then getting a home loan is one of the safest methods to allocate funds for either of those. Not everyone has millions of rupees in their account to purchase a property. Loans can be intimidating too, but by comparing your options, you can get a deal that is reasonable to pay off.
The loan repayment can be made in two ways, which are pre-EMI and full EMI. Furthermore, these are two popular payment schemes for under-construction properties that homebuyers can choose from while purchasing a new home. Understanding the differences between these two payment schemes is crucial to make an informed decision and to manage your finances effectively.
Pre-EMI
Pre-EMI, or pre-equated monthly installment, is a payment option available to homebuyers during the construction period of their under-construction property. In this scheme, homebuyers only have to pay a part of the interest amount on loan taken to purchase the property. The remaining principal amount is due once the construction is complete and the property is handed over to the buyer.
For instance, suppose you have taken a home loan of ₹45 Lakhs at an interest rate of 8% per annum. The loan tenure is 20 years. Now the home will take 3 years to complete, and the bank gives you ₹5 Lakhs for that period. The total tenure will be 23 years.
During the pre-EMI period, the interest component of the amount allocated that you have to pay is ₹3,000 per month. Using the home loan EMI calculator from here, you can compute the EMI. Furthermore, with the amortized loan schedule, you can get the sum difference of the interest amount.
Advantages of Pre-EMI:
- Reduced monthly outgo: As only a part of the interest amount is payable during the construction period, the monthly outgo for the homebuyer is lower compared to Full EMI Calculator.
- Flexibility: The homebuyer can choose to pay the remaining principal amount after the construction is complete and the property is handed over. This allows for better financial planning and reduces the burden of paying a large amount at once.
Disadvantages of Pre-EMI:
- Increased overall interest: As only a part of the interest amount is payable during the construction period, the remaining interest gets accumulated and added to the principal amount. This increases the overall interest payable on the loan.
Full EMI
Full EMI, or full equated monthly installment, is a payment option where homebuyers have to pay the complete EMI, including both the principal and interest amount, from the start of the loan. This option is suitable for homebuyers who have a steady income and can afford to pay a higher monthly outgo.
Advantages of Full EMI:
- Reduced overall interest: As the complete EMI, including both the principal and interest amount, is payable from the start of the loan, the overall interest payable on the loan is lower compared to Pre-EMI.
- Faster loan repayment: Paying the full EMI from the start of the loan helps in reducing the loan tenure and quicker repayment of the loan.
Disadvantages of Full EMI:
- Higher monthly outgo: As the complete EMI, including both the principal and interest amount, is payable from the start of the loan, the monthly outgo for the homebuyer is higher compared to Pre-EMI.
For instance, suppose you have taken an SBI home loan of ₹45 Lakhs at an interest rate of 8% per annum. The loan tenure is 20 years.
With the full-EMI period, you have to pay both the interest component and principal amount of the loan, which comes to ₹37,640 per month. You can use the instant and error-free SBI home loan EMI calculator to evaluate the EMI from here.
Bottom Line
In conclusion, Pre-EMI and Full EMI are two popular payment options available to homebuyers during the construction period of their under-construction property. The choice between these two options largely depends on the homebuyer’s financial stability, monthly income, and overall financial planning. It is essential to consider the advantages and disadvantages of each option and make an informed decision that best suits your needs and financial situation. Furthermore, at freeemicalculator.in you can find other loan-specific calculators as well. Additionally, if you are taking HDFC Home Loan, there is HDFC Home Loan EMI Calculator.
Visit Here :- What is the EMI for a 400000 Loan
