Jun 15, 2023Home Ally

Mortgage Repayment Options: EMIs, Prepayment, Foreclosure

by Godrej Properties Limited



Mortgage Prepayment Alternatives You Must Know

Repaying a mortgage is a significant financial commitment for homeowners in India. It involves choosing the right repayment option that aligns with their financial goals and circumstances. To make this process manageable and flexible, various repayment options are available. This article explores three key options.

Mortgage Repayment Options

1. Equated Monthly Instalments EMIs

Equated Monthly Instalments, commonly known as EMIs, are a popular repayment option in India. Under this method, borrowers repay their mortgage loans in fixed monthly instalments over a predetermined period, typically ranging from 10 to 30 years. The EMI includes both the principal amount and the interest charged by the lender. The interest component is higher in the initial stages of the loan, gradually reducing over time. EMIs offer the following prospects: Predictability EMIs provide borrowers with a predictable payment schedule, making budgeting and financial planning easier.

2. Prepayment Portion

Prepayment refers to repaying a portion or the entire outstanding mortgage loan amount before the scheduled tenure. Homeowners can choose to prepay their loans either partially or fully. Prepayment comes with several benefits. Interest Savings By prepaying the loan, borrowers can save significantly on interest payments, as they reduce the principal amount on which interest is calculated. Flexible Repayment Depending on the loan terms, borrowers may be allowed to make prepayments without any penalties or charges. However, it is important to review the loan agreement to understand any associated costs or restrictions.

3. Foreclosure Repayment

Foreclosure refers to the complete repayment of the outstanding mortgage loan before the agreed-upon tenure. Unlike prepayment, foreclosure involves settling the entire loan amount at once, often through a lump sum payment. Here are some aspects to consider regarding foreclosure Penalty Charges Lenders typically impose foreclosure charges or penalties on borrowers who opt for this repayment option. These charges vary across lenders and loan agreements, so it is crucial to understand the terms beforehand.

In Conclusion

Regarding mortgage repayment options in India, borrowers have several choices to suit their financial goals and circumstances. EMIs provide a structured approach, ensuring predictable monthly payments. Prepayment allows borrowers to save on interest and reduce their overall debt burden. However, reviewing the loan agreement to understand any associated costs is essential. 

Frequently asked questions 

1. Can I choose a combination of repayment options?

Ans. Yes, borrowers can choose a combination of repayment options based on their financial circumstances and goals. For example, they can opt for regular EMIs while also making occasional prepayments to reduce the principal amount and save on interest. Discussing the options with the lender and seeking professional advice to make informed decisions is advisable.

2. Can I change the EMI amount?

Ans. In most cases, the EMI amount is fixed based on the loan terms and cannot be changed during the loan tenure. However, some lenders may offer the option to change the EMI amount under certain circumstances, such as financial hardships. It is advisable to check with the lender regarding their policies on changing EMI amounts.

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