What is a home loan moratorium period?

The home loan moratorium is a specific period of the home loan tenor where borrowers will not have to repay any amount. It refers to the duration before the customer starts repayment of EMIs at the agreed-upon home loan interest rate. Generally, customers have to start repaying EMIs from the first day when they get the home loan amount disbursed till the final day of the tenor. However, this isn’t the case with a moratorium period in effect.

Typically, this period is usually applicable to education loans and home loans. Some lenders may call it an EMI holiday, and it is a helpful feature. If you need this feature, speak to your lender and check if it is available to you. If it is offered to you, be sure to read and understand all the home loan terms and conditions applicable.

It is crucial to the borrowing process as it gives you a clear idea of your responsibility. Similarly, be sure to use the Home Loan Eligibility Calculator to see how much each EMI is shaping up to be and to gauge your repayment capability. These tools help you know how much you can qualify for and give you invaluable insight into the cost of the loan.

Benefits of Moratorium Period in Home Loan

The purpose of this period is to make sure that the customer is ready to repay the loan from a financial perspective. The interest of the loan in the moratorium period will be calculated on the principle of simple interest. It will only be worked out on the amount actually offered and not the entire loan. The interest charged will be computed and added to the principal amount. Thereafter, once you start repaying EMIs, the accumulated interest in the moratorium period will be included in the EMIs along with the principal amount.

Moratorium periods are not grace periods. They are given to borrowers to get their finances on track and start repaying the home loan without the possibilities of defaults while grace periods are added time given for the clearing of loan dues. Interest is not charged in the grace period unlike a moratorium period. Check with your lender about a moratorium period in case you need one before you start repaying your home loan.