These days home loan companies are offering many customized repayment options to suit the borrower’s loan requirements. Among these options, some provide flexibility in repaying the loan, while others are linked to the various stages of the house construction. Overall, these plans are for the benefit of both the lender and the borrower. Some of these plans can even increase the repayment capacity of the borrower along with some tax benefits.
A Home Loan which starts with Delayed EMI Payments
A home loan with delayed EMI payments is a very good option for some of the borrowers who are not able to pay the EMIs at the beginning of the loan tenure. This option offers the home loan borrower to begin the repayment of their home loan later. This facility is provided by SBI with which flexi pay is available where the borrower is not bound to make repayment anywhere between 36 months and 60 months. This period is known as moratorium period and during this, the home loan borrower need not pay any EMI but only the pre-agreed rate.
Step-down Repayment Plan
Step-down repayment plan is also known as the flexible installment plan. This plan is structured in a way that the EMI amount payable for your home loan will decreases as the loan progresses. This means that in the initial years the repayment installments i.e. the EMIs will be high and it will be reduced in the later years. This plan uses the concept of reducing the balance to determine EMI amounts in different stages of the repayment.
This repayment plan is best for those who are near to retirement. This is because, with this repayment plan an individual can pay high EMI amounts for initial years when they are still employed or when they have more income, and then in the later years, the EMI will reduce when they will be retired or have less income. In this the repayment amount in proportion to the decrease in their income.
This repayment plan is also suitable for where children and parents buy property together. Here, the parents are close to retirement and the children have just started earning. In this plan, the incomes of both parent and children are combined to avail a long-term loan.
Step-up Repayment Plan or Home Loan with Increasing EMIs
Step up repayment plan is structured in such a way that the home loan EMI keeps increasing after the initial few years. This means that in the initial years the EMI will be less in the initial year and will increase after some the tenure. For this repayment option on your home loan, you can consider the Housing Development Finance Corporation’s (HDFC) Step Up Repayment Facility (SURF) or ICICI Bank’s Step Up Home Loans.
In this type of loan, one can avail a higher loan amount and pay lower EMIs in the initial years. However, the repayment is accelerated with the increasing tenure. This repayment plan is good for those you have to guaranteed higher income in some years or in near future.
Home Loan with Lump-sum Payment
On the purchase of an under construction property, a borrower is generally required to serve only the interest on the loan amount drawn till the final disbursement. EMIs are and payable thereafter. In case if one wishes to start principal repayment immediately, he/she have the option to start paying EMIs on the cumulative amount disbursed. The amount paid will be first adjusted for the interest. The balance amount will go towards principal repayment.
Under a balloon payment, a home loan borrower repays about one-third of the loan amount in the last installments. Balloon payment involves a lump sum payment towards a loan in some predetermined intervals like 5 yearly or at the last stages of a long-term loan. This repayment option is advised only for those who have very high financial needs. It should be avoided as the borrower have to pay more interest when compared to any other loan schemes or plan.
Fixed and Flexible Installment Plan
Under a fixed repayment plan for a home loan, the EMI is fixed for a certain period or for the whole tenure. If it is fixed for a particular period of time, EMI is adjusted after that period as per the market rate. During the fixed tenure, the EMI is not affected by market conditions and it remains constant. Fixed rate installment plan is beneficial for borrowers when interest rates are expected to rise in near future. However, a borrower needs to be aware while signing the loan agreement as some lenders in their agreement have the provision of increasing the fixed amount in fixed time.
Opposite to it is a flexible loan repayment option, the EMIs are not fixed and varies with the market fluctuations. EMIs can’t be same for a long time when you for a flexible repayment. The EMI may increase or may decrease depending on the market value.
Home Loan With a Waiver of EMI
This repayment scheme is available with Axis Bank known as ‘Fast Forward Home Loans’. Under this scheme, 12 EMIs can be waived off if all other installments have been paid regularly by you. In this scheme, six EMIs are waived on completing of 10 years, and another 6 months on completion of 15 years. Under this scheme, the loan tenure has to be of 20 years and the minimum loan amount is of INR 30 lakh.
There are several schemes under which one can pay his/her home loan. Borrowers can choose their home loan along with the repayment options very wisely on the basis of their favourable conditions but many times some people miss out on these opportunities as they are not aware of these options. But always remember choosing your repayment options wisely can save you a lot and can avoid unwanted situations.