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Atanu (Manager)     14 January 2010

RE: Home Loan

Dear Sir / Madam,

Recently i have applied for  home loan and got sanction from one of the nationalised bank. I am suppose to pay 70% of the total property cost to builder as the building is under construction. but my question is even though bank is going to give me disbursement of 70% of my sanction amount they are saying that the EMI which i need to pay every month would be same even if they giving 70% of total sanction amount. Is this feasible. It would great help if you could help me to understand the same.



 4 Replies

V. VASUDEVAN (LEGAL COUNSEL)     14 January 2010

 EMI = Equated Monthly Instalments - As the term suggests, the loan amount and the interest calculated for the entire tenure of loan is divided into uniform monthly instalments. Splitting this for the loan amount distributed and remaining would pose a problem in EMI. Hence I presume the bank while granting the full loan,  after disbursing the 70%, would keep the 30% to your credit. This amount since lying with them on your behalf, needs to earn interest. You can get this clarified.


Parthasarathi Loganathan (Advocate)     29 January 2010

I disagree with Mr. Vasudevan.  In this case, the bank is keeping 30% as margin to the total loan component based on your eligibility.  In any case this must have been derived out of the estimates submitted by you by the approval valuer /engineer.  Instalment must have been calculated only on the 70% loan component.

Swami Sadashiva Brahmendra Sar (Nil)     31 January 2010

I am also curious to know about these issues .

I will appreciate if friends would throw light on subsequent  enhancement of EMI by the bank saying that the home loan is given  on floating rate.

Parthasarathi Loganathan (Advocate)     01 February 2010

Floating Rate is applied by the bank at the request of the borrower based on the contractual agreement. Since floating rate of interest used to be lower than that of the Fixed Rate, customers prefer the former though they are aware of the consequences of burden in case there is upward revision of interest rates. These rates have a direct impact on the quantum of EMI fixed since it has account for service of both interest and principal. Once interest rates were hiked, it would naturally have a direct impact over the EMI component and hence the hike in EMI. 

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