What is the Meaning of Moratorium Period in a Home Loan?
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What is the Meaning of Moratorium Period in a Home Loan?

  • Highlights

  • Moratorium period is also known as an EMI holiday period

  • Plan your finances & EMI outflow during the moratorium

  • Get 3-EMI holiday on a Bajaj Finserv Home Loan

  • Check home loan terms post the moratorium period

Taking a home loan to finance your home purchase is a big financial step. However, starting off 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 in case you see that there is a construction-related delay on the project you are investing in. In these situations, you can take the benefit of the moratorium period on your home loan allowed by your lender.

What is a moratorium period?

A moratorium period is basically a length of time during which you enjoy a holiday from your home loan EMIs. 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 an EMI holiday and begin paying EMIs after a break. Lenders offer this facility to help you plan your finances better, such that you get acquainted with the lengthy obligation of a home loan in a more organised manner. Bajaj Finserv, for example, grants 3-EMI holiday on a Home Loan of up to Rs.10 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 take your home loan EMIs into consideration. You can use the time to pay for other home-related expenses such as paying for stamp duty, registration and brokerage or simply to 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 this break on your home loan.

Additional Read: The different types of loans available in India

How to avail a moratorium on your home loan

The terms and conditions for the moratorium period on your home loan can vary across lenders. In order 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, in order 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.

Another way to enjoy paying lower EMIs apart from availing a moratorium 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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