When Does Home Loan EMIs Start?

Buying a house is a dream for many, but it often requires a home loan. Understanding the repayment process is crucial to manage your finances effectively. One of the most important aspects is knowing when your home loan Equated Monthly Instalments (EMIs) start. By calculating home loan EMIs in advance, you can plan your finances better and manage these monthly payments without any stress. 

In this blog, we will explore the housing loan disbursement stages and guide you on when exactly your home loan EMI begins. We will also provide some useful tips for making informed decisions about loan repayment.

Understanding housing loan disbursement stages

When it comes to home loans, the disbursement process plays a significant role in determining when EMIs start. Here are the key housing loan disbursement stages:

• Loan sanction: Once your home loan application is approved by the lender, they will issue a sanction letter specifying the approved loan amount and terms.
• Agreement and documentation: You'll need to sign an agreement with the lender and provide necessary documents such as property papers, identity proofs, income proofs, etc. 
• Property verification: The lender will conduct an evaluation of the property by hiring professionals to ensure its value matches the loan amount. 
• Loan disbursement: After completing all legal formalities and property verification, the lender will disburse the approved loan amount. This can be done either in one go or in instalments based on construction progress (in case of under-construction properties).
• EMI commencement: The commencement of loan EMI typically begins a few weeks after completing all necessary paperwork and meeting the disbursement conditions. The lender will provide a repayment schedule indicating the total number of instalments and the date of the first EMI payment. 

Calculating home loan EMIs

Calculating home loan EMIs in advance can help you plan your finances better. Here's how:

• Using a housing loan EMI calculator: An online housing loan EMI calculator simplifies the calculation process. Enter details such as loan amount, home loan interest rate, and tenure, to get an accurate EMI amount.

• EMI formula: The EMI can also be calculated using a formula: 

  EMI = p r (1+R)^n / [(1+R)^n-1]

  where:

  • P is the principal loan amount
  • R is the monthly interest rate
  • N is the total number of EMIs

  Let's say you took a loan of ₹50 lakhs for 20 years at an interest rate of 7%. Using an online calculator or the formula, your EMI would be approximately ₹38,765.
  

• Factors affecting EMIs: Several factors influence your home loan EMIs, including loan amount, interest rate, tenure, and type of interest (fixed or floating). Higher loan amounts or longer tenures result in higher EMIs. 

When does EMI start for home loan?

The start date of your home loan EMI depends on various factors: 

• Loan disbursement date: Generally, EMIs begin once the lender disburses the loan amount to you or directly to the builder/seller during the property purchase.
• Complete disbursement: If your loan amount is fully disbursed at once, your EMIs will start from the following month after disbursement.
• Partial disbursement: In cases where lenders release loan amounts in instalments for under-construction properties, EMIs may start after complete disbursement. Until then, you may have the option to pay pre-EMI interest or choose a moratorium period.

How to plan your finances before starting a home loan?

Now that you understand when home loan EMIs start, it's essential to plan your finances accordingly. Here are some tips:

• Create a budget: Evaluate your monthly income and expenses to create a realistic budget. Allocate a portion of your income towards the EMI payment and ensure you have enough funds to cover other essential expenses. 
• Emergency fund: Build an emergency fund that can cover at least 3-6 months' worth of expenses. This provides a safety net in case of unforeseen circumstances affecting your ability to pay your home loan EMI.
• Prepayment options: Check if your lender allows prepayment of the loan without any penalty or charges. If possible, make periodic extra payments towards principal amount reduction, which can significantly reduce home loan interest costs over time.
• Insurance coverage: Consider taking insurance coverage such as home loan insurance or term life insurance to protect yourself and your family from unexpected events that could impact loan repayment.

Conclusion

Understanding when home loan EMI starts is crucial for effective financial planning. By knowing the disbursement stages, calculating EMIs accurately, and considering various factors affecting repayment, you can manage your finances better and avoid unnecessary stress. 

For affordable home loan interest rate and flexible repayment options for home loans, explore Mahindra Finance's offerings—a trusted institution empowering Indians on their homeownership journey. 

FAQs

1) How can I calculate my home loan EMI?

You can calculate your home loan EMI either by using a mathematical formula or by using an online housing loan EMI calculator. This housing loan EMI calculator is user-friendly and provides quick results.

2) What factors affect the home loan interest rate?

Several factors influence the home loan interest rate, including market conditions, credit score, borrower's income stability, and loan tenure. It's advisable to compare interest rates offered by different lenders before finalising a home loan.

3) When does EMI start for home loan?

The commencement of home loan EMIs depends on factors such as the disbursement stages, loan agreement, and lender's policies. Typically, EMIs start after partial or complete disbursement of the loan amount. 

4) Is it possible to change the EMI amount for a home loan after commencement of loan?

In some cases, it may be possible to change the EMI amount for a home loan after commencement of loan. However, this usually requires formal approval from the lender and may come with certain conditions or charges.