First-Time Home Buyers Can Now Save Couple Of Lakhs On Loan Interest

In a bid to bring more beneficiaries under the ambit of Pradhan Mantri Awas Yojana- Urban (PMAYU), the government has announced two new subsidy slabs. Now, first-time home buyers with an annual income of up to Rs 18 lakh can also avail of subsidy benefits for a part of their loans. Earlier, people from only economically weaker sections (annual income of up to Rs 3 lakh) and low-income groups (annual income of up to Rs 6 lakh) were eligible to apply for housing loan under the mission.  According to media reports, from 15 years earlier to 20 years now, the loan tenure under the plan has also been extended. On the other hand, there would be no cap on the home loan amount.

Also read: Govt Extends Support To Middle-Class Home Buyers

Here is how the new plan would work out:

If you earn up to Rs 6 lakh annually

• Interest subsidy of 6.5 percentage points will be allowed for loans up to Rs 6 lakh.

Case study

Alok Sharma, whose annual income is Rs 5 lakh, took a loan of Rs 10 lakh to buy a house at the interest rate of nine per cent for a period of 20 period.  If he avails of a loan under the government subsidy scheme, he will have to pay an interest of 2.5 per cent on Rs 6 lakh of this amount — factoring in an interest subsidy of 6.5 percentage points on his income bracket. On the remaining Rs 4 lakh, an interest rate of nine per cent will be levied.   This would amount to Sharma saving Rs 2,219 per EMI (equated monthly instalment) and over Rs 2.46 lakh on a whole.

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If you earn up to Rs 12 lakh annually

• Interest subsidy of four percentage points will be allowed for loans up to Rs 9 lakh.

Case study

Mukesh Sharma, whose annual income is Rs 12 lakh, took a loan of Rs 25 lakh to buy a house at the interest rate of nine per cent for a period of 20 years.  If he avails of a loan under the government subsidy scheme, he will have to pay an interest of five per cent on Rs 9 lakh of this amount — factoring in an interest subsidy of four percentage points on his income bracket. On the remaining Rs 16 lakh, an interest rate of nine per cent will be levied. This would amount to Sharma saving Rs 2,158 per EMI and over Rs 2.39 lakh on a whole.

If you earn up to Rs 18 lakh annually

• Interest subsidy of three percentage points will be allowed for loans up to Rs 12 lakh.

Case study

Suresh Sharma, whose annual income is Rs 18 lakh, took a loan of Rs 35 lakh to buy a house at the interest rate of nine per cent for a period of 20 years.  If he avails of a loan under the government subsidy scheme, he will have to pay an interest of six per cent on Rs 12 lakh of this amount — factoring in an interest subsidy of three percentage points on his income bracket. On the remaining Rs 23 lakh, an interest rate of nine per cent will be levied. This would amount to Sharma saving Rs 2,200 per EMI and over Rs 2.44 lakh on a whole.