EMI stands for equated monthly installments. As a borrower, you need to pay the lender a fixed amount every month on a specified date. The EMI is the sum total of the principal amount and the interest amount divided over the tenure of the loan. However, your monthly value is fixed for each month, the principal amount paid and interest amount paid changes every month. For the first few years, the interest portion is higher. With time, the interest amount keeps reducing and principal amount keeps increasing. Therefore, your 70-75% interest will be paid in the first few years of the entire loan tenure.

Home loan is a loan taken from any financial institution for buying a house. The EMI that is calculated for this loan is termed as a Home loan EMI.

For home loans disbursed against an under-construction property, the lender can offer an EMI that begins once the construction is complete. Until then, you can pay just the interest part of the loan that is termed as a Pre-EMI. Pre-EMI amount is less than full EMI amount since you will be paying just the interest component of the EMI and the principal loan amount remains intact. The Pre-EMI duration is not a part of your home loan duration. Let’s take an example to understand this better. Say you have a loan of 15,00,000 lacs for 20 years on a property that gets completed in 3 years. Your calculated EMI is Rs. 25,000/-. During these 3 years you can pay the interest part of the EMI. That would be your Pre-EMI and the total loan duration would be 23 years (20+3).

You should opt of Pre-EMI if:

• If you wish to save money during the pre-EMI period and invest it in such a way that they get good returns on the amount saved.
• If you wish to sell your property once the construction is complete.
• If you are waiting for an income change and feel now it is not possible to afford a full EMI.

EMI is calculated using a simple mathematical formula, that is EMI Amount = [P x R x (1+R)^N]/[(1+R)^N-1]. Here P stands for the principal loan amount, R is the rate of interest and N is the number of years for which the loan is taken. The value of the EMI changes according to these variables.