Your Guide To Understanding Property Loan Disbursement Disbursal is the final step that happens once the loan is sanctioned and approved. When a Home Loan is taken on an under-construction property, the entire loan amount is not disbursed to the builder at once. Instead, the disbursal happens in parts on the basis of the completion of the stages of construction by the builder.

During this stage, the borrower doesn’t have to pay the full EMI (Principle +Interest) on the sanctioned loan amount, but has to pay an interest amount only called the Pre-EMI. The Pre-EMI is the interest calculated only on the amount that has been disbursed to the builder, as per the stage of construction.

Let’s take an example to understand a Pre-EMI further: If you have taken a loan of Rs 30 lakh at 8% p.a. At the start of construction, supposing your bank only disburses Rs 3 lakh to the builder, your pre-EMI will be calculated as interest on the Rs 3 lakh, i.e.

Rs 2,000/month. As construction progresses, more funds are disbursed and the Pre-EMI increases proportionately. Say, if an additional Rs 3 lakh is disbursed to the builder after 6 months, now the Pre-EMI will increase accordingly to Rs 4,000/month. Unlike the Pre-EMI, the EMI that you will pay consists of the principle and the interest amount.

Once construction is completed on the property, the entire sanctioned loan amount is disbursed to the builder. Now, your actual EMI cycle starts and accordingly the principle balance of repayment starts reducing.

You can also opt to start paying the EMI amount after your first disbursal, in under construction projects, however, you have to make this choice know to the lender before disbursal.To learn more about your or visit our today. T&CFor disclaimer,

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How does a construction loan work?

During construction, you commonly make interest-only payments on the balance of the money you’ve drawn. The loan is designed to pay the contractors and subcontractors who build your home in regular installments, usually based on how much of the work has been completed at each stage of construction.

Can you get a home loan for under-construction properties?

Home loans for under-construction properties can help you complete the construction of your residential property without any hassles or delays. You can avail a housing loan for your property whether it is being constructed independently by a contractor hired by you or by a reputed builder.

How to get a housing loan for a house built by contractors?

Home loans for under-construction properties can help you complete the construction of your residential property without any hassles or delays. You can avail a housing loan for your property whether it is being constructed independently by a contractor hired by you or by a reputed builder.

What are the tax benefits on a home loan for under construction?

Features and Benefits of Home Loans for Under-Construction Properties – There are several benefits and features of home loans for properties that are being constructed from scratch. These are as given below:

• Lower EMIs: Under-construction home loans are sometimes disbursed in installments according to the requirements of the stage of construction, with interest being charged only on the amount that is disbursed, leading to lower EMIs
• Flexible repayment tenures: While this can vary from bank to bank, repayment tenures can go up to 30 years depending on the age of the borrower at the time of availing the loan
• Attractive interest rates: You can get attractive interest rates on home loans that can be even more affordable if you have a good credit score
• Interest payments: Until you get possession of your house, you only have to pay the interest component of your housing loan, which is termed the PPI-Prior Period Interest.
• Tax Benefits: Tax benefits on a home loan for under construction properties can be availed for up to Rs.2 lakh for the interest component and up to Rs.1.5 lakh of the principal component of the home loan after receipt of the Occupancy Certificate from the builder.

What are the requirements for a home construction loan?

• Credit approval
• Project approval
• Builder approval

Can I get a construction loan and build a home?

What is an FHA construction loan? – An FHA construction loan is a mortgage that allows you to roll in the costs of building a home from the ground up. There are two types of FHA construction loans: the construction-to-permanent loan and the FHA 203(k) loan,

How to get a loan to build a home?

• Collateral: While personal loans are typically unsecured, home equity loans use your house as collateral.
• Loan amount: If you have a large home improvement project planned,a home equity loan may be a better fit.
• Interest rates: Because home equity loans are secured,they generally have lower interest rates than personal loans.

How to start home loan process?

• Estimate your budget. How much home can you afford?
• Get pre–approved for a loan Once you’ve estimated your own budget,you might start looking at homes within your price range.
• Shop for your home and make an offer Now that you’ve been pre–approved,it’s time for the fun part – house hunting.