Difference Between Pre-EMI And Full-EMI Repayment Schemes For Home Loans. Which Is Better?

Difference Between Full-EMI and Pre-EMI

Most people don’t have enough money saved to buy a home entirely, even though it’s sometimes one of the biggest expenditures they’ll ever make. One might obtain a home loan to pay for the costs of the building if one desires to build their own house. Refinancing a mortgage can be done by a homeowner to benefit from lower interest rates, reduced monthly payments, or to move to a different kind of loan. Overall, a home loan can be a helpful instrument for assisting individuals in achieving their housing ambitions, managing their finances, or making real estate investments.

The majority of people resort to home loans when purchasing a house. This loan can be repaid through equated monthly installments spanning across tenures that last up to 30 years. It is crucial to opt for a lender with economical interest rates. In case you are planning to buy a house whose construction is underway then you would have to pay pre EMI.

Here is what it means.

What is Pre-EMI?

Pre-EMI is the interest that is only charged on loans. During the time that the building or house is being built, this sum is paid, and after that, it is over. Since only the interest portion of the EMI is paid out and the principal loan amount is left untouched, the pre-EMI amount is smaller than the whole EMI amount. The loan tenure does not include the pre-EMI period.

When should you choose this option?

The Pre-EMI option should be selected only when an individual does not have enough money to pay the rent as well as the loan repayment EMI. They can also choose if they have plans to sell the property either right after the construction or in the first few years. 

What is meant by full EMI?

The total EMI payment for a home loan comprises both the principle and interest installments. This payment will begin as soon as the house or building is finished being built. Some banks also approve the initiation of full EMI payments when the loan amount is being disbursed in installments.

Difference between Full-EMI and Pre-EMI options?

  1. Loan disbursal: When the loan amount is disbursed altogether, the Full-EMI option is utilized. On the contrary, when the loan’s sum is disbursed in installments, the Pre-EMI option is typically chosen.
  2. Calculation of interest rate: The interest for the Full-EMI option is based on the main loan amount, whereas the interest for Pre-EMI is compounded based on the loan amount given to the builder.
  3. Loan repayment period: By selecting the Full-EMI option over the Pre-EMI option, the debt is paid off more quickly because the monthly installments under this option include a bigger share of the principal amount.
  4. EMI payments: With the Pre-EMI option, the monthly payments started as soon as construction began whereas the Full-EMI option’s EMI payments don’t commence until the property is finished and under your ownership.


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