What is Pre EMI?

During the under-construction stage of a property, home loan borrowers have the option of pre-EMI payments. With this approach, you just pay the interest portion of the total amount that the bank disburses for your home loan. Following the completion of construction and when the property is ready for possession, the principal repayment process starts. I hope this helps you understand what is pre EMI in housing loan. 

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What is Pre EMI for Home Loan?

As you are not repaying the principal amount, pre-EMI installments usually cost less than full EMI payments. Some of the benefits of pre EMI are:

1. Reduced Initial EMIs: You only pay interest on the amount disbursed during the construction period, which lowers EMIs and makes financial management simpler.

2. Decreased Financial Stress: Pre-EMI is perfect for rent-paying homeowners since it relieves the strain by postponing full EMI payments until after possession, giving them more opportunity to increase their income.

3. Advantage of Tax Benefits: Despite not being immediately deductible, interest paid during construction may be recovered under Section 24 in five equal installments (post-possession) up to Rs. 2 lakh per year.

Hope this helps!

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What is the difference between pre emi vs full emi?

Pre EMI is a popular concept among investors. A friend works for a realtor and he told me that the top investors in his network usually opt for Pre EMI and soon after getting possession of the under construction apartment, they sell it off. This came up when I enquired about what is pre EMI from him since I had just heard this term in the bank.

To catch you up, what is pre EMI you ask right.

Pre EMI is an interest component which is paid monthly on the total loan amount availed till the construction of a building is completed. Although the borrower has to make more payments, the pre-EMI concept is relatively cheaper than a full-EMI concept. 

This form of EMI is payable until you get possession of the completed property. This is practically what is pre EMI interest. 

Now you must be wondering why would someone opt for it? Is it even a wise decision? I am going to share a few things with you on that:

• A borrower who is low on cash supply can opt for Pre EMI

• It is also wise to use this option in case of urgent cash needs

• Before opting for Pre EMI options, borrowers must keep in mind that it may burn a hole in their pocket if the project construction gets delayed

• The repayment of loan amount starts only after the complete possession of the property so up until then it doesn’t affect loan amount of repayment tenure

• There are no tax benefits in case of pre EMI option

I hope this clarifies your concerns on what is pre EMI and you got to know some important facts about pre EMI interest.