Pre-EMI and Full EMI are two home loan repayment types that are available for home loan borrowers. Here are the key differences between these two EMI formats:
|
Pre EMI |
Full EMI |
|
|
Ideal for |
Those who want to delay the EMI payment to benefit from opportunity cost of capital. |
Those who want to take faster possession of property. |
|
Borrowers can |
Sell the property post construction without bearing the EMI burden. |
Those who face risk of construction delays and wish to avoid higher cost of capital. |
|
Tax benefits |
No tax deduction during construction phase. Post construction, interest component of EMI can be claimed for tax deduction. |
No tax deduction during construction phase. Post construction, interest component of EMI can be claimed for tax deduction. |
|
Loan disbursal |
Disbursed in parts |
Full disbursal at once |
|
Repayment tenure |
Slower debt repayment |
Faster debt repayment |
|
Start of EMI |
Start of property construction |
Post construction and possession of property |
|
Property resale |
Immediately post property construction |
Not possible to sell property until the timeline defined by the bank |
|
Financial impact |
Easier on pocket since only interest has to be paid during pre-construction. |
May cause financial strain since both principal and interest components have to be paid from the start. |
Recommended read - What Happens If I Miss An Emi Payment On My Loan
To conclude, EMI is the most important aspect of home loans. Therefore, a home loan borrower must understand the concepts of pre and full EMI in detail while knowing the key differences between the two. Doing so will help a home loan borrower make an informed decision at the time of loan application and ensure a smooth repayment process.