It is important that before one applies for a home loan, one has a clear understanding of the long term financial commitment one would be making. At times, choosing the right home loan can be the solution of all the problems but to do that one needs to know the difference between a regular home loan and a Flexi Hybrid Home Loan, which is one of the special offerings from Bajaj Finserv. The NBFC offers both a regular loan as well as a Flexi Hybrid Home Loan, with quite affordable home loan interest rates ranging between 8% and 14%. Here are the basic differences between the two.
While both the loans have a high loan tenure and favorable terms, the constitution of the EMIs tend to differ. In case of a regular home loan, the EMIs that one pays consists of both the principal amount and the interest paid on it. In the initial days of loan repayment, the percentage of the interest in the EMIs is higher than the principal. With the progress of the tenure, the interest component becomes lower and the principal increases and by the end of the tenure, the full EMI constitutes the principal payment. In case of a Flexi Home loan, EMIs are structured quite differently and some comprise of only interest, and some interest and principal.
In case of a regular home loan, the amount of the EMI stays constant, although the ratio of interest and principal in it might change. In case of a Flexi Hybrid Home loan, the tenure begins with a fairly low EMI and it mostly comprises of interest only. The home loan borrower has the option to get a 4 year EMI holiday, and only from the fifth year onwards, the total EMI combining interest and principal has to be paid. In the 4 years in between, one can utilize the time and the money saved to manage one’s finances. Use a housing loan EMI calculator to determine exactly how much can be saved.
In case of part- prepayments, with a regular home loan, one can enjoy lower EMIs if one chooses to pay off a lump sum in the middle of the tenure. For the rest of the tenure, the borrower has the option to enjoy lower EMIs for the same tenure period, or he can choose to pay the same EMI amount and repay the loan quickly. In case of a Flexi Hybrid Loan, the prepayment works a little differently. When a prepayment is made, the lender will set the money aside and you will have no difference in the EMI amount. The benefits are to be enjoyed later. Home loan tenures are loan, and it is possible that one suddenly finds themselves in need of extra cash during the tenure. In that case, one can take back the amount that one initially paid as part- prepayment and pay only a very low interest on it and utilize the money. If this money is not needed anymore in future, then the lender closes the loan immediately as soon as the loan balance reaches the point when only a sum equivalent to the amount prepaid is left to be repaid. All of a sudden, your loans are repaid and much faster. With Bajaj Finserv, one can keep on making as many prepayments as one wants at no extra cost.
Hence, both these loans have their benefits but Flexi Hybrid Loans are great for those who want flexible repayment options and cannot afford to pay the full EMI at the beginning. They need not stall the purchase of their dream house though and therein lies the beauty of the system, so apply for home loan accordingly.