Money saving tips

Published on November 8th, 2015 | by Falcon

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Options for Making Home Loan EMI

Home loans are an integral part of modern day real estate market. These are not only the cheapest mode of credit available for general public but also offer several benefits including income tax rebate. Having said this one of the biggest dilemma’s that home loan customers face today is pre emi vs emi challenge. This is because of high cost of real estate. The homes have become so costly in most of the leading cities in India that the average cost of 1 BHK flat is 50 lakh rupees. This basically implies that home buyers need to take loan of nearly 40 lakh rupees that translates to EMI of approximately 40,000 INR/month. This is no easy mean for an average Indian whose net monthly income is 50,000 INR. Hence, several users prefer to book homes in pre-launch stage and opt for pre EMI options as this is the only way out for them to get their names on the property ladder.

The concept of pre bookings or booking homes at launch stage has also picked up due to rise of online web portals like housing.com. A firm like housing.com acts as a facilitator that promotes buying, selling and renting of online through more than 1.6 million verified assets hosted on its website. The firm today stands as a symbol of trust and transparency which was so far lacking in realty domain. Buyers who look to book their home through housing do not have to worry about the authenticity of an asset as all of the properties listed on its site are 100% confirmed and duly substantiated. Housing.com as a company has also brought in price parity in the market as it has provided a selling platform to common men, property agents, small builders and big developers, alike. The more number of sellers has given way to more competition and as a result the prices have rationalized to a great extent. The property prices in most places in India today no longer seem inflated. Yes, it is true that prices are still high and affordability is a concern but that is something to do with macro-economic conditions and changing global dynamics. Nonetheless, here are ways for making up for home loan EMI –

Borrow less than affordability

Most buyers try and stretch their home loan affordability to a maximum limit. However, this must be avoided at all cost. Users must be careful and must exercise due diligence before applying for home loans. The monthly EMI should always be kept to 40% of net monthly income.

Opt for lower tenures

Even if people are going for higher EMI, they must make sure that the tenure of the loan is kept low. A combination of high EMI and longer tenure can be financially killing and this mistake must be avoided at all cost. A simple example here is that a loan of 50 lakh rupees for 20 years at the rate of 10.0% per annum will result in interest amount of 65,80,000 INR. Nevertheless, the same loan amount for a period of 10 years at 10.0% per annum will carry an interest amount of only 29,30,000 INR. The savings in this case is huge.


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