Wednesday, October 28, 2015

Evaluate No Pre-EMI till Possession (20-80) or (10-80-10) Payment Scheme

Know the home buying schemes well, before opting for one:

Know No Pre EMI EMI after Possession Offer

In this scheme the property is being bought with the home loan, the EMIs are on account of the buyer.

The buyer's credit history is at stake if for some reasons the project is delayed way beyond scheduled date.

In some scenarios the EMIs will kick in at the scheduled date even though the house or apartment is not ready.

Remember it’s a tripartite agreement between the buyer, bank and the builder. And the buyer is bound to start the EMIs even if the apartment is not delivered by the scheduled date as per the builder-buyer agreement.

This compounds the problem of the buyer due to his additional cash outflow, arising owing to EMIs. He continues to pay the rent for the house where he lives.

The purchased asset that is property in such circumstances cannot be sold (for obvious reasons) and buyer's inability to exit the project creates the financial stress.

Any default due to inability of the buyer to pay EMIs hurts his credit score and loan eligibility in future.

In these schemes buyer must also watch out for the interest being offered to him by the bank.

Is it close to the market rates?

Is it changing as per the RBI interest rates if floating interest rate option is chosen?

One must also scrutinize the loan agreement for the interest rates that will be levied on his home loan after the unit is delivered to the buyer.

Also one must note that the buyer will lose the pre-construction interest benefit if the construction phase has gone beyond three years;

So in-effect the No-EMI scheme until possession can become a trouble in buyer’s financial life if not assessed for risks it carries. Read More

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