Home Loan Repayment

​What is Home Loan Repayment?

Home Loan repayment, also known as Home Loan foreclosure, is when a borrower repays the full outstanding loan amount in a single payment instead of opting for EMIs. It is part of the Home Loan process wherein the borrower can pay off the loan before the expiry of the tenor. Usually, the repayment tenor of a Home Loan expands up to 32 years in the form of small, manageable EMIs as per the amortization schedule of the lender. For first-time borrowers wondering what home repayment is, what are the different types, and how to repay the amount, here are all the details.

Housing Loan Repayment Options

While financial institutions and banks determine the housing loan repayment schedule in most cases, the borrower can make certain changes as per convenience and financial needs. For example – one may either choose to pay the EMI in small installments throughout the length of the tenor or pay a higher instalment to pay off the entire amount way before the expiry of the loan tenor. Borrowers can pick from the following Home Loan repayment methods.

Step-Up Repayment

For this type of repayment option, the EMI amount increases as the tenor extends. In other words, the borrower pays a lesser EMI during the initial years of loan repayment and a larger EMI as the tenor progresses. This type of repayment option is best suited for freshers or newbies if they do not have enough funds to pay off the EMIs during the start of their careers.

Step-Down Repayment

Contradictory to the previous one, the Step-down repayment option involves an eventual decrease in the housing loan EMI with the extension of the tenor. This is suitable for borrowers nearing retirement age since paying off a higher EMI can be easier when one has a steady source of income.

EMI Holiday

Some lenders offer an exclusive EMI holiday at the beginning of the repayment schedule to delay the EMI deduction from the bank account by a couple of months following the loan disbursal.

Lump-Sum Repayment

This is a great option for borrowers planning to settle the loan amount immediately. In the case of a housing loan, the total amount can be disbursed in instalments, in such cases, the borrower only pays the interest on the loan amount, also known as pre-EMIs, till the disbursal of the final instalment. The EMIs, which comprise both interest and the principal amount, are payable following the complete disbursal of the housing loan. The lump-sum payment can be done after the full disbursement of the loan amount.

Balloon Repayment

This option works along the same lines as the lump sum repayment, but the borrower has to make a larger payment as the last instalment. The tenor is usually taken for a shorter period.

Prepayment

Prepayment is a good option for those who have surplus funds in hand and are willing to repay the amount completely or partially. However, some lenders may charge a penalty for housing loan prepayments. Note: Individual borrowers with a floating interest rate on Home Loans do not have to pay any extra charges for prepayment or foreclosure.

*Terms and conditions apply.