Moratorium Period – A State Of Borrower’s Temporary Inactivity In Home Loans

By Author: Aditya Ahuja
Total Articles: 7
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Opting for a home loan to finance your house purchase is a significant decision. Nonetheless, starting with repayments immediately might not be feasible for some borrowers, given their fiscal responsibilities.

What if the house construction gets delayed? In scenarios similar to this, the moratorium period can benefit you. Here’s outlining what the moratorium period is. So, without much ado, here’s presenting the narrative.

Introducing the Concept of the Moratorium Period

A duration where a borrower does not require making the home loan EMI payment gets referred to as the moratorium period. It’s the state of temporary inactivity, which usually starts at the beginning of EMI repayment. In simple language, it’s the EMI holiday period.

Home loan applicants can enjoy the benefits of the moratorium period at the beginning of their EMI repayment schedule. When home loan constructions don’t get completed, house seekers can prevent themselves from paying the EMIs.

The burden of meeting expenses of the present rental accommodation and EMIs can be taxing for them. In such cases, the ...
... moratorium period comes to the rescue to alleviate fiscal stress. Home loan claimants may use the moratorium to plan their finances, thereby preparing for the forthcoming EMIs.

Moratorium Period vs. Grace Period: Are These Two The Same?

Thinking that grace and moratorium periods are the same is a sheer misconception. The grace period is the extended time given to the borrower to clear the dues. The moratorium accrues interest to the account & gets offered to prevent defaults & possibilities of accumulation of the dues.

The Impact of Moratorium Period on Your EMI

You may pay your moratorium interest during the period. In such scenarios, the EMI would not get impacted because you are already paying the interest. But you may opt for an alternative payment method where you pay the moratorium interest after your original EMI.

In such cases, the moratorium period would not have any impact on the EMI. This way, the EMI remains the same & only the tenure increases.
Your equated monthly instalments get impacted when you do not choose the mentioned ways. When that happens, the interest accrued will get adjusted by increasing the EMI. In such cases, you would not have to pay anything during your holiday period.

But before availing of the loan, you need to consult the financial institute. Ensure that you are thorough with their terms, as some institutions can increase the rate of interest after your holiday period. It usually happens with home loans sanctioned on floating interest rates.

Opting for Moratorium Period on the Home Loan

The terms of the moratorium period on a home loan may vary depending on the financial institution. To avoid confusion & make a safe choice, select a reputable lender that provides a moratorium. Always remember to compare the home loan interest rates to avoid paying increased interest rates once the period is over.

After ensuring your eligibility using the home loan calculator, please compute how the EMIs get impacted once you avail of the moratorium. For such cases, you would require calculating the moratorium period via a calculator.

Availing of Moratorium Period: Points to Note

Here are some parameters that you need to consider when availing of the moratorium period:

#1 for home buyers, a grace period may sound convenient. However, you must understand that you require paying interest during the period.

#2 When a home loan applicant aims to defer the EMI amount, the interest charged during the moratorium period gets added to the total amount borrowed. It gets adjusted in payable EMIs.

#3 The moratorium period might have some similar aspects related to the No EMI scheme. However, they are not the same.

As a final thought, note that the moratorium period is significant while taking a home loan. It is a blessing in disguise for the times you require it the most. In cases when your home construction stops or fails to complete, you can avail of it and get the total benefit. But while applying for a home loan, please ensure that the financial institution offers this benefit to you.

Read more related content:https://www.herohousingfinance.com/