Buying a home with savings is almost impossible today's era. Property rates are increasing every day, and how! Most of the people can buy property through home loan. These loans can be repaid in affordable Equated Monthly Installments (EMIs) over a tenure of up to 25 years. As a borrower, you need to understand the different types of EMIs. There are two types of EMIs- Pre EMI & Full EMI. Now we will know about the differences in both EMIs.
Pre EMI definition and meaning
This is an option that most of the borrowers opt for as the lender disburses the loan amount partially and the borrowers have to pay only the interest component of the loan and not the entire EMI (consisting of both principal and interest payments) ), till the entire loan amount is reached. fully distributed. Pre EMI is one such option that borrowers can opt for only when they are taking a home loan for an under construction property. Once the entire loan amount sanctioned is fully disbursed, you can start paying the entire EMI amount. Usually, you can pay pre-EMI for a period of up to three years, under which the construction should be completed.
Pre EMI and full EMI – the differences
The difference between Pre EMI and Full EMI can be understood easily with the help of the points which are given below.
- Difference in loan disbursal
If you opt for pre-EMI, the loan amount is partially disbursed. If you opt for full EMI, you can seek disbursement of the entire loan amount.
- Difference in loan repayment
The EMI amount you pay is very less in case of Pre EMI vs Full EMI, where you have to pay the entire EMI amount irrespective of the loan amount disbursed.
- Difference in interest rate
Full EMI interest rates are calculated as per the entire principal amount. Pre EMI interest rate is calculated as per the loan amount which is disbursed.
Pre-EMI refers to the monthly payment which includes only the interest component of your home loan. With Pre-EMI, you are not paying anything of the principal amount. You will be given the option to pay pre-EMI when your house or apartment is under construction.
After completing the construction your EMIs will be start on your principal loan amount.
If you think you can claim for interest which you paid to the lender as EMI so, this will not be possible from any bank or HFCs.
Yes, You can start claiming tax deduction on the pre-EMI of your home loan only after the construction of the property will complete. Tax deduction on the total interest paid during the construction period can be claimed in five equal installments in the subsequent five years.
Frequently Asked Questions
What is pre EMI interest on home loan?
Pre-EMI is the payment of interest only as applicable on the loan. This amount is paid only for the period during which the house & building is being constructed. It ends after the construction is complete.
How is pre EMI calculated for home loan?
EMI = Principal + Interest paid on the loan. The EMI, generally, remains fixed for the entire tenure of your loan and has to be repaid on a monthly basis over the tenure of the loan. During the initial years of your loan tenure, you pay more for interest.
Is it mandatory to pay pre-EMI?
Thus pre-EMI is a lower payment as it does not consider the major component of the home loan.
With Pre-EMI, you are not paying anything of the principal amount. You will be given the option to make pre-EMI payments when your house or apartment is under construction.
Can Pre-EMI be avoided?
Some lenders do not allow you to part-preclose the loan under the pre-EMI stage. They will ask you to pay installments to the builder in lieu of certain installments, but will not let you reduce the loan amount.
What is pre EMI interest on home loan?
Pre-EMI is the payment of interest only as applicable on the loan. This amount is paid for the period during which the house/building is being constructed. It ends after the construction is complete.
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