When Does Home Loan EMI Start?

Owning a home is easily possible by acquiring a home loan, which helps one get quick and easy finances to finance a home purchase. Apart from this, these loans offer the benefit of repaying them in EMIs, which saves the trouble of paying the loan all at once. However, a new home buyer may have concerns such as what is a home loan EMI, when does EMI start for a home loan, how can you pay them back, etc. This article provides answers to all such queries and all other essential information regarding home loan EMIs.

What is a Home Loan EMI?

A home loan EMI (Equated Monthly Installment) is a fixed sum of money that a borrower must pay to the lender on a specific date each month. This payment is made to repay the loan taken out for purchasing a home. Since repaying the entire loan amount in one go can be challenging, banks provide the option for borrowers to repay in smaller, more manageable instalments known as Home Loan EMIs.

Additionally, there is a concept called pre-EMI in home loans, which many individuals are unaware of. Understanding what is pre EMI in home loan helps one to manage their loan in the most effective manner. It refers to a phase where the borrower pays only the interest component of the home loan before the actual EMI payments begin. This can be particularly helpful if someone has a tight budget but still wishes to finance the construction of their home.

When Does EMI Start for a Home Loan?

EMI usually begins when the amount is fully disbursed in the borrower’s bank account. 

• The amount is disbursed in two ways,ways which are full disbursement or partial disbursement.
• The full disbursement means when the lender transfers the full loan amount to the borrower’s account after the complete documentation.
• The partial disbursement means when the lender disburses only part of the amount in the borrower’s bank account. 
• The EMI for partial disbursement is known as pre EMI home loan. Additionally, pre EMI interest on housing loans refers to the interest charged on the disbursed amount before the complete loan amount is released. 

Understanding how pre EMI home loan and pre EMI interest on housing loans can help you plan your finances better before the full EMI begins.

Factors Determining Home Loan EMI

Home loan EMI is the fixed, small monthly payment that a borrower needs to make to the lender. Some of the considerable factors are mentioned below.

Loan Disbursement Date

The loan disbursement date is one of the major factors that decide when the EMI for the loan will begin. This is because at times the EMI starts immediately after the disbursement of the amount in the borrower’s bank account. However, sometimes lenders offer some grace period, and after this, the borrower can start making these payments.

Partial Disbursement

In partial disbursements, lenders disburse only some part of the loan amount to the borrower’s account. For this, the borrower gets the benefit of not paying the entire installment amount at once. However, they need to pay pre EMI interest on housing loan which means part of the amount. The complete EMI amount repayment can start once the full amount is disbursed in the borrower’s account.

Full Disbursement

In full disbursement, the borrower needs to start repaying the loan in full EMIs all at once. This happens when all the documentation is completed and the lender is satisfied with your application. The lender sends the complete amount to the borrower’s account, and the moment the amount is disbursed the EMI starts. Some lenders offer a grace period, so the repayment starts after that.

How is the Final EMI Amount Decided?

The Final EMI amount of a loan is decided based on some crucial factors that must be understood before applying for a home loan. This helps one easily compare different lenders and choose the one that would suit one’s financial needs.

Loan Amount

One of the major factors considered when calculating the EMI of a loan amount is the amount of loan taken. It’s one of the two major components used for calculating EMI for a home loan.

Loan Interest Rate

Another important factor that needs to be considered when calculating the final EMI amount of a home loan is the interest rate of the loan. This helps calculate the additional amount to be added to the principal to know the complete EMI amount per month.

Loan Repayment Tenure

The repayment tenure decides the amount of EMI one will pay for a loan. If the loan tenure is shorter, the EMI amount will be bigger. However, if the loan tenure is longer the EMI amount will be smaller.

Essential Documentation for Home Loan Approval

After understanding what home loan EMIs are, what is pre EMI and how they start, one must understand the documentation for these Loans. This is because minimal documentation helps to speed up the approval process and saves one’s time.

• Identification Proof: To take a home loan first one needs to submit their identity proof. This identity proof might include documents such as an Aadhar card, PAN card, etc. 
• Address Proof: For this, the person might provide an electricity bill, passport, voter ID, Aadhar card, etc. 
• Credit Reports: A credit report is considered a credit score, which must be higher than 750 to be eligible for any kind of loan, below that is considered poor.
• Property Documents: These documents can include title deeds and a No objection certificate (NOC), which signifies your property is a legal property.

Conclusion

Home loan EMIs start as soon as the amount gets disbursed in the account of the borrower. However, there are pre EMIs also that work when one makes a partial repayment of the loan. These EMIs only include part of the interest payment, and the full EMI payment starts only when the full amount is disbursed. This EMI is the addition of principal and interest. 

FAQs on Home Loan EMIs

1. Does home loan EMI start after possession?

Yes, the home loan EMI usually starts after possession.

2. When should we start paying EMI for a home loan?

One should start paying the EMI for a home loan on or before the due date.

3. Does EMI start from next month?

Yes, once the loan is approved and the amount is disbursed, the EMI for the loan starts from the next month.

4. When did EMI start after disbursement?

The EMI starts 1 month after the amount has been disbursed to the borrower’s account.