Most of us are familiar with a typical home loan, where you borrow a specific sum for a fixed or floating interest rate and tenure. In this case, your lender approves a lump sum, and you pay the interest on the entire amount. Also, your EMI consists of both principal and interest repayment.
What if there was another option where the split between principal and interest repayment changes over time? What if you could withdraw from the very amount you paid at a low-interest rate? Such terms could not only help you purchase your dream home but also stay liquid enough to finish any renovation or interior work or use it for any other purpose.
Both these things are possible with a flexi-hybrid home loan. Let’s understand this unique housing finance in detail.
What is a Flexi Home Loan?
A flexible home loan is an alternative type of housing finance with higher loan eligibility and flexibility to pay EMIs. How? Here, applicants can repay only the interest component of their loan for a few years. Not only does this make for a low EMI, but it also reduces the loan’s interest burden.
After a few years, your flexi home loan’s EMI goes up marginally to include repayment of the principal amount along with the interest amount. Typically, borrowers can opt for a moratorium of 60 months, depending on the lending institution, until when they only repay the interest component.
How Does a Flexi Pay Home Loan Work?
In addition to the added flexibility in terms of interest repayment, there is also a prepayment option. For example, suppose you have some disposable sum lying with you, which you want to use to prepay your flexi hybrid loan.
In such a case, you can make a partial prepayment, which the bank holds for you but does not reduce from the principal amount just yet. They do this, so you can take an additional loan against the amount you prepay at a nominal interest rate.
Once you prepay your total outstanding amount, the lender closes your loan account prematurely. Safe to say, with a flexi pay home loan, you can keep your EMIs low by repaying only the interest component in the beginning. After which, you can switch to repaying or prepaying the principal amount. When you make a part prepayment, the lender can loan you this money at a very low ROI in case you need it down the road.
Benefits of Flexi Home Loan
Given flexi housing loans' unique features, check out the top advantages it offers borrowers.
1. Time to Organise Finances
Since flexi home loan solutions let you keep your EMIs low for a few initial years, you get sufficient time to organise your finances for future repayments. Perhaps, the money you saved by delaying your principal payments can be reinvested to earn high returns. You can then use those returns to pay off the principal amount and still be left with a substantial pool of money.
2. Never Run Out of Funds
As mentioned above, flexi home loan solutions operate in hybrid mode, meaning you can keep re-borrowing by way of prepaying the principal amount. In such cases, you are only charged interest on the amount you borrow from the pool of prepaid sums.
This way, you never run out of funds and can fund miscellaneous expenses than come with purchasing a brand-new home.
Now taking a loan is not mandatory. You can simply pay off your interest first, make partial or full prepayment towards the principal sum, and have the lender close your loan account altogether.
3. Relaxed Eligibility
Studies show that due to the very nature of flexi housing loans, their eligibility is 1.2 times higher than regular home loan eligibility. Add to it, most credible lenders usually inquire about the following.
How old are you? If you sit within their flexible age range, you pass this criterion.
What is your employment status and type?
What kind of property do you wish to purchase? Fully constructed or under construction. Both types may be eligible for a hybrid flexi housing loan, but the lending conditions may differ.
In addition to these, a lender will likely ask you to submit a few documents that verify your identity, income and current address. What’s more, depending on the lending institution, you may end up applying for this type of loan online through their web portal.
The Bottom Line
With such unique features and flexibility offered by a hybrid flexi housing loan, you can buy your dream home while managing your finances better.
Looking for a credible lending institution with a highly trusted track record? Your search ends at Tata Capital. You’ll find our flexi housing loans are offered at affordable interest rates, flexible repayment tenures and minimal documentation.
Head over to our website to check our housing finance offerings today!
31 January 2023
5 mins read
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