by Ramya Suresh 
If you dream of buying a home for a long time through home loan, you might have few questions that
will not let you sleep. Which home loan repayment option is the best? Which bank or finance offers better service? or you may be struck with which bank first.
If you are at the beginning stage read about Factors to consider before applying for a home loan. After finalizing the bank, to apply for a loan, a study in detail various repayment options. This article will help you with that. Whenever you are on the hunt for a home loan, consider the term of home loan repayment. Choose and negotiate for the lowest rate of interest, processing fees, documentation charges.
Home loan repayment options:
- Home loans with delayed start of EMI: Banks like SBI have a home loan with delayed commencement of EMI for working professionals. Professionals between 21 to 45 years have an option to defer payment of EMI during the moratorium period. Once the moratorium period gets over, the borrower has to repay at a higher ROI at the rate fixed earlier. Even though it looks like an incredible option, you should have a regular source of income to repay a higher ROI at the age of 35 or retirement.
- Step-down repayment plan: A retiring parent can choose this type of home loan repayment option to buy a house with his just started earning son. When a father’s or son’s income alone is insufficient to buy a decent home, a step-down payment can help them repay conveniently. This loan works as diminishing EMI as the term progresses. Step-down repayment loan has an option to pay a higher amount as EMI during the initial years. The scaling down of EMI happens during later years as the amount repaid is reduced from the outstanding balance.
- Home loan by linking idle savings in bank account: Home loans like SBI Max gain, ICICI bank’s home loan overdraft facility, IDBI’s home loan interest saver helps the customer to open a current account and link it with the loan account. Anytime you can put in or take out money from the current account. The lender will calculate the EMI on the amount outstanding minus the amount lying idle in the current account.
- Home loan in lumpsum payment for under-construction property: HDFC tranche-based loan helps you start paying EMI for the principal amount before getting the final lumpsum amount. This method is applicable for the under-construction property where the customer pays EMI to pay towards the interest.
- Balloon payment: A borrower chooses a balloon payment option when he has a huge financial requirement. He will pay one-third of his loan amount during the last tenure of the loan. Usually, the borrower pays back the loan amount at frequent intervals, like every five years or seven years. This kind of loan carries heavy interest and should be avoided unless in case of urgency.
- Fixed and Flexible installment plan: Fixed installment plan is a loan plan in which the EMI is fixed either for the whole period or a fixed number of years. EMI doesn’t fluctuate according to the market rate. This plan protects a borrower from increasing EMI in the future. While signing the document, the borrower should be cautious as there is a high probability of increasing the EMI after a certain period. On the contrary, EMI in a flexible installment plan varies according to the market rate.
- Home loan with a waiver of EMI: In some home loans like Subh Aramb home loan by Axis bank, the bank will exempt six months of EMI. When you repay EMIs for ten years without any default. After 15 years, another 6 months of EMI will be waived off. But the loan amount should be not less than 30lakhs, and the loan tenure must be for 20 years.
Tips to reduce the burden of home loan repayment:
- A shorter repayment option will result in faster repayment of the principal amount. Banks calculate interest on the amount outstanding. So opt for a shorter tenure.
- Refinance option will lower the interest rate of your loan.
- Opt for Flexi-Pay home loans. If you opt to increase the rate of interest year after year, you can pay back before tenure.
- Pay more amount as EMI or pay an extra EMI to reduce the principal amount. It will help you reduce the interest rate effectively.
In short, finding a reasonable lender is as tough as finding the right builder. But we are here to make the process smooth. All you have to do is a little research to find out the best option for you. Many lenders offer tailor-made loan options that suit different kinds of people. There are so many repayment options available for borrowers. You can choose any one of the options mentioned above according to your financial requirement and repayment capacity.
