'Pay when you stay', 'EMI waiver': LICHF's plan offers relief to borrowers

LIC Housing Finance (LICHF) launched its ‘2020 Home Loan Offer’ on January 15 at an interest rate starting from 8.10 per cent. The offer has two variants: ‘The Pay When You Stay’ offer and the ‘EMI Waiver’ offer. An LICHF spokesperson said this home loan product was targeted at buyers of under-construction properties as well as those opting for ready-to-move-in properties.

‘Pay When You Stay’ scheme

Here, the customer has to begin repaying the principal on the home loan after getting possession of the house, or after 48 months from the first disbursement, whichever is earlier. Interest will be paid by the borrower on the amount disbursed during this period.

Says Ratan Chaudhary, head of home loans, PaisaBazaar: “This product is perfect for borrowers living in rented accommodation as the principal moratorium will reduce their financial burden.”

Customers often find it difficult to bear the burden of rent and equated monthly instalment (EMI) simultaneously. This loan will give them a breather as they will only have to pay interest.

But what if you are someone who can afford the entire EMI and pay rent as well? Says Chaudhary: “The product will result in higher interest cost for those capable of paying the regular EMI right from the disbursement of the loan.”

The principal moratorium period is not allowed to be more than 20 per cent (rounded off to the nearest completed year) of the original sanctioned term, and can also not exceed four years. After that, the EMI will commence. The EMI will be fixed in such a manner that the loan gets liquidated within the original sanctioned term.

This is a limited period offer till February 29 and the disbursement must take place before March 15. The minimum loan amount is Rs 20 lakh. The maximum is Rs 2 crore; the maximum tenure is 30 years.

‘EMI Waiver’ scheme

The LICHF spokesperson says: “Two EMIs each at the end of the fifth, 10th, and 15th year will be waived under this offer, on the condition that the borrower is regular in making repayments and makes no prepayment for the first five years.”

Ready-to-move-in homebuyers can enjoy waiver of six EMIs during the loan tenure. Says Pankaj Bansal, vice-president and head-key accounts, BankBazaar: “Home loans usually have big-ticket sizes. The monthly EMI can be a substantial chunk of the monthly income. So, getting a break from EMIs for a couple of months can offer big relief to customers.”

EMI waivers are attractive alternatives for borrowers who do not intend to, or do not have the means to make prepayments on the loan, especially in the first 5-10 years of the tenure. 

Bansal further adds: “Such schemes are suited for customers who have a long repayment schedule of 15-20 years instead of 8-10 years. Before you opt for a loan with an EMI waiver, check the prepayment clause.”

From the lender’s perspective, such loans tend to have lower delinquency rates as borrowers make sure they do not default on their EMIs to avail of the waiver. Says Bansal: “If you think you will be in a position to prepay at least a part of your loan, especially in the first five years, use an EMI calculator to understand how much money you will save if you prepay a part of your loan vis-à-vis opting for the EMI waiver scheme. Even a prepayment of Rs 1 lakh against your loan in the first five years can reduce the interest you need to repay by a good amount.”

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