Glossary
Pre-EMI
Pre-EMI is interest-only payment on the part of your home loan already disbursed, paid while the flat is being built and before full EMIs start.
In plain words
On an under-construction flat, the bank pays the builder in stages. You pay interest only on what has been paid out so far. That monthly interest is the pre-EMI. It does not reduce your loan at all. Full EMIs, which repay both interest and principal, usually begin once the whole loan is disbursed or the flat is handed over.
A worked example (illustrative)
Say ₹20 lakh of your loan has been disbursed, at 8.5% a year. Pre-EMI is ₹20,00,000 × 8.5% ÷ 12 = about ₹14,167 a month. When the next stage adds another ₹10 lakh, it rises to about ₹21,250. If you are also paying rent, add the two together; that is your real monthly cost until you move in.
Pre-EMI or full EMI?
Many banks let you start full EMI from the first disbursement instead. You pay more each month, but the loan starts shrinking straight away and you finish sooner. Pre-EMI keeps the monthly outgo low, which helps when rent is still running, but every pre-EMI rupee is interest only.
- Choose pre-EMI if rent plus full EMI would stretch you.
- Choose full EMI if you can afford it; it saves interest overall.
- Ask whether the builder is paying interest under a subvention offer, and get it in writing.
Our EMI calculator shows the full EMI on the same loan for comparison.
Read more on the blog
Related terms
See all glossary terms. This page explains a term; it is not legal or tax advice, and rupee figures are illustrative.
FAQ
Pre-EMI: common questions
Does pre-EMI reduce my loan?
No. It is interest only. Your principal stays the same until full EMIs begin.
How is pre-EMI calculated?
Disbursed amount × annual interest rate ÷ 12. On ₹20 lakh at 8.5%, that is about ₹14,167 a month.
Can I claim tax benefits on pre-EMI interest?
Under the Income Tax Act, interest paid before construction is complete can be claimed in five equal parts from the year construction finishes, within the overall limit. Check with your tax adviser for your case.
When do full EMIs start?
Usually once the loan is fully disbursed, or earlier if you choose. Your sanction letter will say.
Want someone to walk you through it?
Ask the Reeva team about this, or anything else on your first-home paperwork. We will call back, with no pressure to buy.