After a few years, the EMI gradually increases with the assumption that the borrower’s income will increase simultaneously to be able to repay the loan comfortably.
Despite the financial setbacks suffered by many as a result of the pandemic, buying a home remains one of the primary financial goals for countless Indians. Many take the help of home loans to finance their purchase after months of research, planning, and budgeting.
However, sometimes many do not try to identify the type of home loan that would best meet their lending needs and repayment capacity. In fact, home loan products can differ not only in terms of interest rate, benchmarking, processing fees, loan type, etc., but also EMI options. Here are some important options for EMI home loans that you need to know about in order to make informed decisions based on your repayment capacity.
Mortgage IMEs with a moratorium
Many banks allow moratorium options to their mortgage borrowers. This facility allows for a delay in EMI payments typically for up to five years, with borrowers only being able to pay interest until the EMI begins. In such an option, the EMI amount is increased over the following years after it is started. If you are looking for higher loan eligibility and expect an increase in your income in the future to meet the gradual EMI repayment requirement, you can opt for this facility. The EMI moratorium mechanism can help you buy a home that is worth more than your current finances will allow.
EMI on mortgage loans with overdraft option
Several banks in the market allow home loans with overdraft facilities (OD). Under this option, the EMI obligation is the same as for ordinary home loan products, but borrowers have the freedom to park excess funds in the bank account in order to save on mortgage interest in this. measure for the period that the fund remains in the Account. This gives borrowers the opportunity to reuse the additional funds stored in the account, which also helps them to maintain a higher level of liquidity.
That being said, additional funds parked in the account are not counted towards the benefits of tax deduction under Section 80C of the Computer Act. In addition, the interest rates on home loans with an OD facility are usually a little higher than those on regular home loan products. This option is useful for some borrowers (such as businessmen) who often receive large funds for a short period of time to help them significantly reduce the interest component of the loan.
Mortgage loans with increasing EMI option
Some banks allow the facility of home loans with the increasing EMI option. In this type of product, the bank sets a lower IME during the first years of the loan. After a few years, the EMI gradually increases with the assumption that the borrower’s income will increase simultaneously to be able to repay the loan comfortably.
Growing EMI Home Loan is suitable for borrowers whose income is low or slightly insufficient to repay the EMI. The bank assumes that the borrower’s income will increase in the years to come so that they can comfortably repay a higher EMI in the future. You can apply for this loan facility if you are just starting your career or have low income in the early years and expect job security for the life of the loan and a steady increase in your earnings. income. In addition, you can also increase your IMEs with a regular home loan.
Options for properties under construction
You can also choose between a pre-EMI option and a full EMI option when purchasing a property under construction. In a pre-IME plan, you only have to pay interest on the amount disbursed until you take possession of the property or the end of the moratorium period (usually around 2-3 years), whichever comes first. contingency. On the other hand, in a full EMI option, you have to start paying the EMI immediately, regardless of which bank disburses the loan partially or fully. Under the full EMI option, the EMI is calculated on the total loan amount and not on the amount disbursed by the bank until that time.
In addition to the EMI options mentioned above, banks may also offer additional variations of mortgage loan products; as such, you will be well advised to educate yourself about the different types of EMI options available from your preferred bank before finalizing your lending decision.
The author is CEO, BankBazaar.com
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