The Step Up Payment Plan:

Some banks now offer the facility of a variable monthly installment scheme for repayment of home loans. The idea being that the salary of a person is bound to increase in the future and therefore a greater portion of the loan can repaid in the later part of one's life. Unlike an EMI ( equal monthly installment ) payment some institutions like ICICI Home offer this facility. The borrower is therefore able to take a larger loan than would be possible with his current income based on an EMI repayment. This enable young people to quickly own a home at an early age.

However, there is a catch . The total interest paid over the the tenure of the loan would be much higher compared to an EMI plan . This is due to a larger portion of the loan being outstanding at any point in time theough the tenure ( period) of the loan is the same. On a Rs. 10 lac loan over a 10 year period, this increase in cot can be as high as Rs. 1.0 lac!

The step Down plan:

For those who are likely to retire in the next few years, flexible loan repayment can still be used. In this case a greater portion of the loan is repaid in the early part of the loan tenure before the person retires as his monthly salary will support this. This is not only convem\nient, but also is a much cheaper option compared to a EMI plan. This is because, the laon outstanding at any point in time is a lower. Interest cost savings on a Rs. 10 lac loan over a 10 year period can be as high as Rs. 4.0 lacs!