2 min read
05 Jan 2021

Taking a home loan to finance your home purchase is a big financial step. However, starting with the repayment almost immediately is not always a feasible option owing to your other monetary responsibilities. Additionally, you may want to defer your home loan repayment if you see a construction-related delay on your investing project. In these situations, you can benefit from the moratorium period on your home loan allowed by your lender.

What is a moratorium period?

A moratorium period is a duration when the borrower doesn’t have to make the home loan EMI payments. This means that you do not have to start repaying your home loan as soon as your loan gets disbursed to you. Instead, you can avail of an EMI holiday and begin paying EMIs after a break. Lenders offer this facility to help you plan your finances better to get acquainted with the lengthy obligation of a home loan in a more organised manner. Bajaj Finserv, for example, grants a 3-EMI holiday on a home loan of Rs. 5 Crore*.

What are the benefits of a moratorium period?

Having an EMI holiday or a moratorium period at the start of your home loan gives you ample time to plan your finances.During this time, you can plan your income and expenditure to consider your home loan EMIs. You can use the time to pay for other home-related expenses such as stamp duty, registration and brokerage, or simply save money for your subsequent EMIs. Additionally, a moratorium period benefits you by providing you enough time to switch jobs or fund the immediate expenses you incur after shifting into your new home.

Now that you know about an EMI holiday or a moratorium period, see how you can avail of this break on your home loan.

How to avail of a moratorium on your home loan?

The terms and conditions for the moratorium period on your home loan can vary across lenders. To avoid confusion and make the best choice, look for lenders that offer a good break during the initial years of the home loan tenor. Remember to compare home loan interest rates carefully as many lenders, to make up for this break, may increase the interest rate once the holiday period is over. This happens mostly with home loans sanctioned on floating interest rates. Calculate how your EMIs are affected by using this EMI holiday calculator.

Once you have decided on your lender, speak to them regarding your needs and clarify all other charges and procedures in advance to ensure you get easy repayment terms through the entire tenor, even after the EMI break.

Apart from availing of a moratorium another way to enjoy paying lower EMIs is to opt for a variant such as a Flexi Hybrid home loan where you pay interest-only EMIs in the first few years (up to 4 years) of your home loan tenor. This also helps you adjust to EMIs conveniently and begin paying full EMIs once your income also increases.

Additional Read: 3 Simple steps for effective home loan management

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