To people’s minds, there’s nothing that shouts ‘security’ more than owning an asset such as a house or an apartment, and people usually put great efforts into saving up enough to be able to afford one. With such a great market going for them, financial institutions are going out of their way to make Home Loans accessible to the masses. A pertinent example of this is the recent launch of the FlexiPay Home Loan Scheme, by the State Bank of India.
According to this scheme, which targets young working professionals, borrowers have the option to pay only the interest on the loan amount during a moratorium period (the period before the EMI payments begin) of 3-5 years. Following this period they can begin to pay their moderated equated monthly instalments (EMIs). These instalments will be lower at the beginning will increase in the following years.
According to the State Bank of India, under this scheme, borrowers will be able to get a higher loan amount compared to what they would normally be eligible for under a regular Home Loan scheme. This will enable them to buy larger homes with greater living space.The repayment format, as well, will help lower the impact of the additional loan amount on the EMIs.
Additional reading: How your Home Loan eligibility is calculated
In A Nutshell
- FlexiPay Home Loan scheme launched by India’s largest lender, the State Bank of India, for salaried individuals / working professionals.
- Only interest to be paid during 3-5 year moratorium.
- Moderated EMIs to be paid in the initial years.
- EMI amounts to be increased in subsequent years.
- Borrowers to have access to greater loan amount
- Impact of additional amount will be lowered due to repayment format.
References have been made to a previous ‘teaser’ Home Loan scheme that was introduced by the bank in 2008. Here, a low interest rate is fixed in the initial years and this is adjusted to a higher, floating rate, in subsequent years. The difference between the ‘teaser’ SBI Home Loan scheme and the Flexipay Home Loan scheme is that for the latter, a floating rate of interest will be applied right from the beginning.
The loan repayment method seems to be structured around the repayment capabilities of working professionals, which tends to increase over time and aims to reduce the burden on the borrower over time.
As with all debt, there are pros and cons to taking any kind of loan. So, do your research, weigh your options and make an informed decision.