Some people have a hard time with home loan repayments. Getting a loan involves both time and money. You could take 20 years to pay back a home loan! So, it is crucial to do thorough research when it comes to the repayment of housing loan.
First, calculate your repayment capacity. Then, you will arrive at an affordable EMI amount, interest rate, and tenor. It is helpful to use a home loan repayment calculator. India has many lenders with such calculators on their websites. You can also use calculators on aggregator websites.
Once you figure out your ideal repayment plan, start looking for a suitable home loan. Nowadays, lenders offer various repayment schemes that you should consider.
Let us now look at some options for home loan repayments.
1. Home Loan with Delayed EMIs
In such a scheme, you can start repaying your loan after a specified amount of time. There is a moratorium period in which you do not need to make EMI payments. This period can be anytime between 36 and 60 months. Once the EMI payments begin, the EMI amount increases at a pre-decided rate. You can get a high loan amount under this scheme.
This is a practical option if you are young and have a secure job. However, if you are middle-aged or about to retire, be careful of choosing this scheme. The increasing EMI rate is then likely to be problematic.
2. Home Loan with Increasing EMIs
Like the earlier scheme, this involves increasing EMIs minus the moratorium period. You get a high loan amount and pay lower EMIs for the initial period. Thereafter, your EMIs increase in proportion with your assumed increase in income. Increasing EMIs also reduce your interest burden as your loan closes faster.
In this scheme, lenders assume that your income will increase over the years. Keep in mind that if your salary plateaus in the future, you would have trouble repaying your loan.
3. Home Loan with Decreasing EMIs
This scheme is the opposite of the earlier one. It has higher EMIs in the initial period that decrease later. This is a good option if you are comfortable paying high EMIs in the early years. Suppose you are nearing retirement and want to repay the bulk of your loan while working. Then, this scheme is ideal for you. You will be able to close your loan earlier and save on interest repayments.
4. Home Loan with EMI Waiver
In this scheme, you pay regular EMIs for a certain period of time. Then, your EMIs are waived for a particular tenor. For example, you pay EMIs for 10 years and then get a waiver of six months. You may get another waiver after 15 years of paying EMIs from the date of loan disbursal. This scheme has a compulsory loan period of 20 years.
5. Home Loan with Flexible Scheme
Some lenders offer flexible facilities depending on individual policies. For example, Bajaj Finserv offers a flexi hybrid home loan. With this, you can get a four-year holiday period for your principal amount. So, you pay only the interest component of your home loan during the initial period. Afterwards, you have to pay both the interest and principal components. Remember, this is on the loan amount actually utilised. Moreover, you can prepay as many times as you want without any charges.
You have several options now for home loan repayments. Choose a scheme that suits you best. Look out for pre-approved offers as well. Discuss all available options with your lender. You need to calculate a realistic picture of your future income prospects. It is useful to select a scheme where the total interest component and tenor are as low as possible.