Home Loan foreclosure refers to the prepayment of the pending Home Loan amount in one go, effectively closing your loan ahead of time. Home Loan repayment, prepayment/part-prepayment, and foreclosure refer to different repayment scenarios, as detailed below.
- Normally, Home Loan repayment is carried out in EMI payments through the course of your repayment tenor
- Home Loan part-prepayment refers to a scenario when you have surplus funds and would like to repay a substantial sum in advance
- Home Loan foreclosure refers to when you have sufficient surplus funds to repay the entire outstanding amount on your Home Loan in one go, before the end of the tenor
Many borrowers choose to foreclose their housing loans if they have the funds handy and would like to avoid accumulating more Home Loan interest through the rest of their repayment tenor. It not only frees up your repayment capacity but makes you debt-free earlier than you may have anticipated.
Most importantly, if you are an individual borrower with a floating interest rate, you don’t have to bear any additional costs or penalties on foreclosing your housing loan.
If you are confused about foreclosing your housing loan, here are some aspects you can consider, making the decision easier for you:
- Tax Benefits: Weigh the tax benefits you may lose out on once you stop your Home Loan EMI payments. Assess whether you can forego the deductions or claim them from elsewhere while considering a loan foreclosure.
- Check Expenses: Calculate whether your finances can take the sudden fund deficit caused by foreclosing your Home Loan balance in one go. Assess your ongoing financial obligations and future goals and consider foreclosing your loan if you have the funds and would like to reallocate your repayment capacity to a different investment.
- Timing of Foreclosure: It is important to plan your home loan foreclosure carefully. Calculate and understand the best time to foreclose your home loan according to your finances and financial goals.
Once you have arrived at the decision to foreclose your ongoing Home Loan, here are the necessary steps to follow, so you can close your Home Loan seamlessly:
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Address a letter to the lender stating your intent to foreclose your ongoing Home Loan.
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Once your foreclosure application is accepted, you will be notified of your outstanding Home Loan balance. It includes your remaining Home Loan amount and foreclosure penalties (if applicable).
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After receiving your outstanding dues, the lender will proceed to release all your documents in their possession, such as your Title Deed and other property-related documents.
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Ensure that you collect a No Objection Certificate and a Home Loan foreclosure letter, confirming that your loan has been diligently repaid. Bajaj Housing Finance issues the foreclosure letter 21 days after the foreclosure request.
To avoid Home Loan foreclosure charges you can use our Home Loan Foreclosure Calculator to give you a better idea of the amount you stand to save if you foreclose your Home Loan on the terms you prefer. The tool is available online and is free to use for everybody.
*Terms and conditions apply
Home Loan Foreclosure: FAQs
Loan foreclosure is generally considered as a good decision, as it means that you have successfully repaid the loan and fulfilled your financial obligation. Also, loan foreclosure portrays you as a responsible borrower who can manage debt well. However, the downside of foreclosure is bearing the fees and charges associated with it, if they’re applicable to you.
Home Loan foreclosure process time vary lender to lender. It depends on the loan agreement and the internal process of the lender. It also depends on the complexity of the loan.
Foreclosing your Home Loan can have a positive impact on your credit score, provided you have made timely EMI payments and cleared all outstanding dues. Also, when you foreclose a loan, the lender updates the status as ‘closed’ which positively impacts your credit report.
You can make part-prepayment to ease out the principal amount and interest burden. You can also request your lender for restructuring, where you can modify your EMIs, tenor, etc. Another alternative is that you can opt for balance transfer wherein you get a low interest rate from another lender.
The decision to opt for prepayment or foreclosure depends on your financial obligations and circumstances. In terms of cost, prepayment typically does not include any extra charges of penalties. However, different lenders levy various charges on foreclosure.
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