Owning a home is everyone’s wish but some people are finding difficulties in fulfilling it, mostly because of the drag in their financial issues. Nowadays, banks are giving home loans to help out this situation. In return, banks are calculating a certain rate of interest at the period of time for the given principle amount.
By doing so, banks can have a regular income for rotation and many branches are opened according to the service need and bank’s revenue. Both the banks and the customers are benefited mutually by EMI policy.
Equated Monthly Installments (EMI) is a fixed amount paid to a borrower from a lender for having the loans. There are two types of EMI available for home loans, one is full EMI or EMI and the other is pre-EMI. Based on your financial stability, you can choose the loan repayment option.
If you have planned to get a loan to purchase your dream home, then take a look at these factors you to need to know before proceeding with the next steps.
Full EMI
Full EMI refers to the repayment of the loan amount that comes with the principle as well as interest for the selected tenure period. Payment starts after the construction of the house, apartment, or building. Some of the banks will also start collecting the loan, once the loan amount is disbursed.
People who don’t want loan commitments in long runs will prefer full EMI option. Sometimes, even the loan due amount will end by the time of construction. Once you own the home then, you are able to get the tax deduction benefits earlier.
Benefits
- If you are facing some delay in the construction of the property, then this full EMI is an ideal option. Because of the long term repayment in pre-EMI will end up in more interest
- Better for people who would like to feel debt-free soon as compared with the pre-EMI option
- Apt for people who consider the property as a long term investment
Drawbacks
- Large sum (principle+interest) has to be paid
- For tenants, this EMI would be an additional burden to your expenses
Pre-EMI
Pre-EMI refers to the repayment of the loan amount that comes only with interest for the disbursed amount which is sanctioned at that time. Once the house is fully constructed, your loan payment is charged together with the principle amount and interest.
Mostly, this option is more suitable for you in case you are planning to sell the property or rent the builder floors. Also, you can take this pre-EMI if you are expecting to gain a large sum or increments in the upcoming months.
Benefits
- Suitable for people those who sell the property after completion or within a few years
- Opt for people who are expecting to get higher income or financial source near in future
- Affordable for the tenants to handle both rent and loan payment since the initial payable amount is small
- Paying interest only for the disbursed amount until the full loan amount is credited
Drawbacks
- After the construction, the loan burden is comparatively higher than the previous
- Repayment of loan would be in longer-term when compared with full EMI
- Not suitable for people who are looking for long term investment
- Hefty interest would be a strain after the dispense full loan
Here is a graphic that sums up the entire post.
Bottom Line
The tax benefits are the same in both cases, whether you avail pre-EMI or full EMI. Tax deductions are not applicable if your property is under construction.
Once you owned the property, you are eligible to get the tax benefits. The interest amount which you have already paid will be calculated and the same has been considered for your tax deduction. After verifying your registered documents, tax deductions will be given in five installments.
The government launched a scheme called Pradhan Mantri Awas Yojana (PMAY) where the citizen will get discount benefits especially, while they choose apartments under certain conditions. Ready to move apartments is one of the best options to avail of loan benefits. Check with Lancor’s various home plans to meet your requirements.
If you are interested to buy a property in Chennai, our Lancor team can help. Contact us (+91-8144-787405) anytime. We are eager to assist you!