Launched in 2015, the Pradhan Mantri Awas Yojana (PMAY) is speedily driving close to its aim of providing affordable housing for all by March 2022. Have you availed of the scheme yet? With property prices dropping sharply, and reduced stamp duties, there could not be a better time than now to make the most of the scheme. However, there are ways in which you can reduce EMIs on home loan under the Pradhan Mantri Awas Yojana. Let’s find out.
How To Reduce Pradhan Mantri Awas Yojana EMIs
There are benefits intrinsic to the scheme that help reduce your EMIs. Then, there are ways in which you can further reduce the EMI amount. Let us discuss them all.
#1 Interest subsidy
PMAY is designed to provide affordable housing for all. To this end, the government has prescribed a certain percentage of interest subsidy to all of the beneficiary categories. Let us understand this with the help of an example – For a housing loan of Rs. 9 lakhs taken by an individual belonging to the MIG I category, where the interest subsidy is offered at the rate of 4%, one can save as much as Rs. 2,062 on the EMI amount per month.
#2 Longer tenure
Another effective way to reduce home loan EMI is to opt for a longer tenure. Under the Pradhan Mantri Awas Yojana, a housing loan can be taken for a maximum of 20 years. Here, it is important to note that though a longer tenure means lower EMIs, it also means higher interest payments. Therefore, choosing a longer tenure is only profitable if the savings on EMI is higher than the interest you pay.
Other ways to reduce EMI amount
Besides the two mentioned above, there are other general ways in which you can reduce your EMI amount, as given below.
#1 Higher downpayment
Most lending institutions will require their housing loan applicants to pay a downpayment, which is a certain portion of the total property value paid upfront to the lender. Though the minimum percentage of downpayment (generally, 10 to 20% of the total property value) varies from lender to lender, it is prudent to make a higher contribution, especially if you have the means to do so. A higher downpayment will naturally lower the home loan principal, and thereby, the EMI amount.
#2 Making prepayments, whenever possible
There are often seasons of salary hikes, bonuses, and more that can be used towards loan prepayment. Instead of making lifestyle expenses, using this money towards paying off a portion of your loan before its stipulated tenure will significantly bring down the loan principal, thereby reducing the EMI amount as well.
Finally, another way to reduce EMIs and ensure a smooth repayment experience is to start on the right note. Use valuable online tools such as home loan EMI calculators and arrive at a suitable EMI amount from the get-go.
