Home Loan query

POSTED BY Debojyoti Das ON April 12, 2013 2:52 pm COMMENTS (5)

Is this is a fair idea to start Home loan EMI only for the amount disbursed to the Builder or it is better to start the full EMI from Day-1 with the effective rate of Interest. If the construction is just started and the possession is after 2 years from now, which is the best method to follow.

Please note that the 20% downpayment is taken care off. I am interested to know about the 80-85% loan provided by Bank on the total flat cost. Please provide the pros and cons of both the options selected.

Thanks always,
debojyoti

5 replies on this article “Home Loan query”

  1. Dear Debo, if cashflow is an issue, no need to strain your life. Please opt for a higher EMI than your Pre EMI. that ‘ll serve the purpose. Regarding calculations, all these matters only if your cashflow is in comfort zone.

    Thanks

    Ashal

  2. Debojyoti Das says:

    dear Ashal,
    Thank you for your response. I am still confused on the part that whether should i opt for Pre-EMI or for full EMI from day-1. I know i will have less cash flow and need to save more if in case I go for the full EMI. (I will have to take a call based on my personal calculation)

    But just wanted to understand in terms of Saving the Interest part and the total outgo of total Loan amount, how much is the difference could be in terms of % or any figure for 30L loan. Example: If I start full EMI from Day -1, I would be giving back to bank 56L after 15 yrs, however, if i start Pre-EMI, I would be giving back to Bank 62L after 15 yrs. Hope you have got my question.

    Best regards
    debojyoti

  3. Dear Debojyoti, yes your understanding is correct.

    thanks

    Ashal

  4. Debojyoti Das says:

    Dear Ashal,
    Here are my observation while doing google. There are generally 3 types of EMI:
    1.Pre EMI
    2.Tranche Based EMI
    3.Acclerated Repayment

    Acclerated Repayment as name suggests to accelerate the loan payment, accelerate the EMI, based on your future earnings to close loan early.

    The Pre EMI came into picture when one buys a house in an underdevelopment project or constructs own house on a piece of land. Here the time gap between the first installment and the complete disbursal of the loan may be up to a couple of years, thus the Pre EMIs are designed to fill in that gap.

    In regards to Tranche Based EMI, it is a smart idea to start repaying the entire EMI from the beginning because the amount that is over and above the interest element will immediately be counted towards the principal thereby reducing a significant portion of the outstanding principal and ultimately reducing the loan tenure.

    To answer your question, the remaining amount after the decution of Interest for 5L will be counted as Principal amount described by Tanche Based EMI. Please clarify if my understanding is correct.

    regards
    debojyoti

  5. Dear Debojyoti, let’s understand it with an example. Your sanctioned loan is 40L Rs. Your eligible EMI is say 40K for full loan amount. As on date, the disbursed amount is only 5L Rs.

    Now you are paying full EMI from day one. What ‘ll be the principal portion in your EMI of 40K if the ROI| is say 10%?

    Thanks

    Ashal

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