RE: Home Loan

 EMI = Equated Monthly Instalments - As the term suggests, the loan amount and the interest calculated for the entire tenure of loan is divided into uniform monthly instalments. Splitting this for the loan amount distributed and remaining would pose a problem in EMI. Hence I presume the bank while granting the full loan,  after disbursing the 70%, would keep the 30% to your credit. This amount since lying with them on your behalf, needs to earn interest. You can get this clarified.

vasudevan

I disagree with Mr. Vasudevan.  In this case, the bank is keeping 30% as margin to the total loan component based on your eligibility.  In any case this must have been derived out of the estimates submitted by you by the approval valuer /engineer.  Instalment must have been calculated only on the 70% loan component.

I am also curious to know about these issues .

I will appreciate if friends would throw light on subsequent  enhancement of EMI by the bank saying that the home loan is given  on floating rate.

Floating Rate is applied by the bank at the request of the borrower based on the contractual agreement. Since floating rate of interest used to be lower than that of the Fixed Rate, customers prefer the former though they are aware of the consequences of burden in case there is upward revision of interest rates. These rates have a direct impact on the quantum of EMI fixed since it has account for service of both interest and principal. Once interest rates were hiked, it would naturally have a direct impact over the EMI component and hence the hike in EMI.