The Home Loan Moratorium Explained: What You Need To Know

Loan Moratorium is the period during the loan term when you can defer from your repayments but as soon as the period ends you have to pay your fixed monthly payments. As soon as the loan is disbursed, your EMIs do not start immediately. You can repay your loan after you complete your course or when you start earning and this is the moratorium period. But you have to pay the simple interest added to the principal amount.

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What Is A Home Loan Moratorium?

It is the period during the loan term when you can defer from your repayments but as soon as the period ends you have to pay your fixed monthly payments. This loan condition is often coupled with the tenure of the loan and the term of the loan but the Home Loan Moratorium does not apply to Term Loans. 

For a Home Loan, the term is the tenure of the loan or the period during which the loan must be paid. 

If you get a Home Loan to buy a property for long-term use, for example, 3 years, then it can be extended to 5 or 7 years. If you are not able to pay EMIs for the loan period, you can choose to buy a home with the mortgage or take a home loan for other purposes or the house loan can be a part of a home loan.

When Is The Moratorium Period?

This depends on the amount that you have borrowed and the period of your repayment is given in the loan agreement. If you have borrowed Rs 5 lakh, you will be allowed to repay your loan for 6 months and then all the remaining 4 months. 

The basic interest rate that is added to your principal amount is 4% and then you have to pay 10% of the loan amount every month for the remaining period. You can pay either the principal amount or the simple interest. 

Why should I pay the interest? You will be making interest payments if you do not pay the principal amount. You have to pay it even if you are unable to repay your loan in full. It is not a problem for you to pay interest but it might not be a big deal to pay the principal amount which is still due.

What Are The Benefits Of A Moratorium?

– Reschedule and extend your repayment period – Avoid a lump sum payment of principal when you make a repayment. – You will know that you will have your loan paid back, with ease What are the benefits of a partial moratorium? – You can pay as much of your EMIs as you can before the end of the moratorium period, if you can – Pay the basic interest on your EMI, but delay paying principal What are the benefits of a full moratorium? – You do not have to pay EMIs during the moratorium period, but have to make your repayments – You cannot pay principle on your EMIs during the moratorium period, but have to pay basic interest – You pay the full principle amount once the moratorium period is over. Is it beneficial to get a home loan during a home loan moratorium?

How To Apply For A Moratorium?

Lenders allow you a period of 2 months from disbursal to decide if you want a moratorium period. You can apply for moratorium period and once the moratorium period is over, you will have to start your repayments immediately. Once you complete the payment of your principal then the amount due is added to your principal and you have to start repaying again. 

If you have done any prepayment in the past you can have this period of moratorium. The amount that you can have the moratorium period is usually 2 months. You can start to repay your principal once you make the prepayment or early payment. You cannot have this for more than 2 months. What if I am considering to pay for EMIs earlier than the due date?

Conclusion

The Home Loan Moratorium period can either extend or shorten depending on the loans given to you and the repayment period.