Home loan foreclosure is when a borrower repays the full outstanding loan amount in a single payment instead of with EMIs. A home loan foreclosure may seem a good option because you get to pay off your debt quickly. However, you must consider certain factors before opting for a foreclosure.
- Does a substantial part of your monthly income go towards EMI payments? If yes, then foreclosing your loan at the earliest is a smart option.
- Do you have urgent financial responsibilities to address? If yes, then use only surplus funds to do the foreclosure.
- Can you earn higher returns if you invest these surplus funds rather than foreclose the loan? If no, foreclose the loan and clear your debt.
- Have you paid your first EMI and can offer a sum that is higher than the total amount of 3 EMIs? If yes, then you can prepay and foreclose your Bajaj Housing Finance Limited Home Loan without any hassles.
Our online foreclosure calculator helps you calculate the amount you need to pay while foreclosing your account. For arriving at the foreclosure amount, you must select the number of EMIs that you have already paid and the month in which you intend to foreclose the account.
As a new borrower, start your journey as a homeowner by simply filling the online home loan application form and get easy home loan approval.
Frequently Asked Questions
Yes, it is possible to foreclose a home loan. Foreclosure is the process of closing a home loan account before the end of the loan term by making a lump sum payment of the outstanding principal amount. In other words, foreclosure is the full repayment of the loan before the original tenure ends.
The penalty for foreclosure of a home loan depends on the type of home loan and the bank's policies. The Reserve Bank of India (RBI) has prohibited banks and housing finance companies from charging any prepayment penalty on home loans with floating interest rates. Therefore, foreclosure of floating-rate home loans does not attract any penalty charges.
However, the RBI has given lenders the discretion to charge a prepayment penalty for fixed-rate home loans, and the penalty amount may vary across different lenders. The bank or lender will also set specific terms and conditions for foreclosure, such as a minimum foreclosure amount, time taken to process the foreclosure request, and the documents required.
It is essential to note that the foreclosure penalty is a one-time fee, and the borrower benefits from foreclosure by paying off the outstanding loan balance and saving interest payments over the remaining loan tenure.
Home foreclosure of a home loan can be a good idea if the borrower has the financial resources to make the lump sum payment and wants to reduce the loan burden. Foreclosure helps the borrower save on the interest outgo and reduce the overall cost of the loan. It also helps in achieving a debt-free status earlier than originally planned and can improve one's credit score.