Let’s face it; given the inflated property prices of today, buying a home outright is an option, not many enjoy. Thus, most homebuyers resort to borrowing a home loan to fulfil their home buying dreams.

With these loans, one can divide the home amount into many small-sized chunks – known as EMIs – and pay them comfortably over 20-30 years. But did you know that they are two ways to structure your EMI repayments? Yes – Pre-EMI and full EMI.

Knowing the difference between the two is imperative as it can essentially lighten your loan burden. So, here’s all you need to know about home loan pre-EMI and full EMI.

What is pre-EMI?

Pre-EMI options are available on under-construction properties. When you choose this option, you only pay the interest component of an EMI and not the principal. Why? Because most building projects require you to shell out part of the total amount at different construction stages, and therefore, the lender also releases money in tranches.

Considering this, pre-EMIs help you cut your loan spendings as you service the loan by paying only the pre-EMI interest. Once you move into your new home, you start paying the principal portion.

However, the pre-EMI period usually lasts for three years, after which you must start paying the full EMI, regardless of whether you’ve received possession or not.

Additional Read – Top Things to keep in mind before prepaying your Home Loan

What is full-EMI?

Full-EMIs are what you pay when you have the keys to your new home. As this includes both the interest and principal, you finally start servicing the outstanding loan amount rather than paying interest.

That said, full-EMIs don’t necessarily have to start when the construction is complete, and you can even pay full EMIs during the construction phase.

Pre-EMI vs full EMI: Which one to choose?

The answer to this question comes down to your preferences and financial situation. If you’re not comfortable paying full EMIs before the property is handed over to you, pre-EMIs are the right choice. Also, if you can’t service the full EMI amount, pre-EMIS can come in handy.

However, consider that you’ll only be paying interest for the pre-EMI period, which means your outstanding amount won’t budge by a single penny. Also, you’ll probably be paying lakhs in absolute interest during the pre-EMI period, which can significantly increase your overall loan spendings. Also, you’re engaged with your loan for a longer time, as the pre-EMI period isn’t included in your loan tenure.

This makes an excellent case for full EMIs, as you’re spending less – both time and money.

Additional Read – Different Housing Loan Options Available in India

Final thoughts

Before choosing any EMI method, thoroughly examine your current and future financial situation, and decide accordingly. If you’re okay spending less initially, even though the total amount will be significantly higher, then choose pre-EMIs. Otherwise, full EMIs will suit you well. You can use a home loan EMI calculator to evaluate your choices.

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