Pre-EMI vs Full EMI

Q: Hi, recently I have booked under-construct Villa project and taken home loan, but I am confused which option should I opt for EMI? Which one is better Pre-EMI or Full EMI?

Wasim Mohammad, Pune

7th August 2015

Home Loan in Pune

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Replies (4)

Hi, I opted for a full EMI for my house loan with SBI. I was supposed to get the possession in an year's time. But now I see the builder is delaying the project and it may be 3-4 years until possession. In the meanwhile it's going to be a problem for me to be paying both house rent and EMIs as well as for my child's education starting next year. Is it possible to switch from full EMI to pre EMI now? I have already been paying the full EMI for the past one year and the bank has disbused about 10 lakh so far.

Chandan Kumar Singh, Apartment Resident

4th September 2015

Comment

Hi Chandan, I don't think there is any provision to switchover from full EMI to Pre EMI. I would like to suggest you that you should consult with the officers of SBI bank, he will better guide you...

ujwal nikam, Pune

11th September 2015

Full EMI is suitable in following case:
1. If the property is a long-term investment and you would like it to be debt-free at the earliest.
2. If you expect delays in the completion of the project and do not wish to wait long to start principal repayment.
3. If you are keen to start experience tax benefits of the property investment

Ramdas Palsule, Pune

7th August 2015

Comment

Hi, I world like to know If you are given a choice between paying pre-EMI vs full EMI during the construction phase, which one should you choose?

Gauri Shinde, Pune

7th August 2015

Comment

Hi Gauri, In my understanding paying full EMI, instead of pre-EMI, makes financial sense but Pre-EMI option is suitable in the following situation:
1. If you have lower cash flows available in the initial years.
2.If you require the balance for some very important immediate needs
3. If you plan to sell your property in the first few years, perhaps even at the time of possession.
4. If you can invest the difference between EMI and Pre-EMI in a manner that you generate returns higher than the rate of interest.

ujwal nikam, Pune

7th August 2015

In full EMI the amount one pays each month will be calculated on the basis of the total loan amount and in Pre EMI one would have to pay only the interest on the loan that will be disbursed at each stage of construction and the real EMI payment will commence only after he gets possession of the home.

Keshavrao Jedhe, Pune

7th August 2015

Comment

Appreciate your responses, under the pre-EMI payment the time taken to complete the home and to get possession holds importance. Assuming that the developer takes three years to hand over the house on an average, and the loan tenure is 20 years, then the buyer would have to pay for 23 years in total. If the project gets delayed, then the tenure would be prolonged as well.

Hamsika Iyer, Pune

7th August 2015

In Full EMI, complete EMIs are paid, the payout will be for a lesser duration as the decrease in the principal component will translate into shorter loan tenure.

Shrabani Deodhar, Pune

7th August 2015