Home Loan

POSTED BY Arijit Chaudhary ON February 3, 2013 5:21 pm ONE COMMENT

Hi,

I have a question on the Pre-EMI loan payments.

I have applied for a home loan of 45L from SBI ( 15 year tenure @ 50,400 EMI per month) and the house is currently under construction. The builder says the house will be ready by 2014 Dec.

I have paid 25% down payment as part of booking, applied for 70% loan from bank and will also do 5% self-payment upon possesion.  

This 70% I understand will be paid by the bank ( SBI) to the builder as per construction. My loan has been sanactioned and the bank has instructed me to repay the Pre-EMI each month as per mony disbursed by bank till final completion of house.

Considering the above, can you suggest me on the below:

Q1) Is Pre-EMI a mandate? I think it helps me to save liquid money ( as its less than full EMI) for the next 2 years. Am i correct?

Q2) This Pre-EMI will only pay the interest amount on the disbursed fund without touching the Principal. Am i correct?

Q3) Does it mean that I have to pay 50,400 for 15 years starting only from 2015. In other words this pre-emi  (interest) which i pay for next 2 years is an extra amount i  need to pay?

Q4) Is thier any Tax benefit on this pre-emi?

Q5) The bank officials are suggesting me to open a recurring account with the bank ( I allready have Saving and FD acount). SO how does it help me?

Request your help/support and answers on the above questions.

Thanks in advance for your valuable help and suggestion.

Regards,

Arijit

One reply on this article “Home Loan”

  1. Dear Arijit, I’m trying to answer your queries.

    Q1) Is Pre-EMI a mandate? I think it helps me to save liquid money ( as its less than full EMI) for the next 2 years. Am i correct?
    Well Pre EMI is nothing but the interest charged by bank from you against the disbursed loan amount till date. You are actually not saving the money as your full EMI ‘ll start after the completion & in a sense, you ‘ll pay a higher interest over all. But if you opt to pay full EMI from day one of your loan, yes in this case, you are prepaying your loan early & now you ‘ll be able to save on interest outgo over the period of loan.

    Q2) This Pre-EMI will only pay the interest amount on the disbursed fund without touching the Principal. Am i correct?
    Yes. For better understanding read point 1 above again.

    Q3) Does it mean that I have to pay 50,400 for 15 years starting only from 2015. In other words this pre-emi (interest) which i pay for next 2 years is an extra amount i need to pay?
    Well, your loan term ‘ll be effectively 13Y from Jan 2015 on wards. Out of 15Y, you already run 2Y with out normal EMI. So only interest was there during this pre EMI period.

    Q4) Is thier any Tax benefit on this pre-emi?
    Tax benefit can be claimed on the interest part (Pre EMI) only after getting the possession of the house in question & that too in 5 equal installments in 5FY starting from the 1st FY you get the possession.

    Q5) The bank officials are suggesting me to open a recurring account with the bank ( I allready have Saving and FD acount). SO how does it help me?
    RD for what? Please explain the reason or logic provided to you by the bank officials.

    Thanks

    Ashal

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