There are a few terms used in real estate and banking which are difficult to understand for the masses especially in the case of Home Loans. Therefore, let us look into the meaning of Home Loan moratorium period and understand how it is connected with your Home Loan and your situation.

Moratorium Definition:

A moratorium period is the duration in the loan term when the borrower doesn’t have to pay any money i.e. no repayment or EMI. It is the waiting time before the repayment of the EMI begins. This tenure starts with the date of disbursement of loan. However, even though the borrower is not required to pay EMIs, the outstanding balance continues to incur interest. In a common man’s language it is the holiday period on the timeline of your repayments.

The moratorium period ensures that your repayments on your Home Loan start after you have had some breathing space. Thus, you actually get some grace time.

What is a Home Loan Moratorium Period?

Say, you have applied for house loan and the bank sanctions the loan for its construction. During the Home Loan moratorium period, you will be granted a grace period for your repayments. You will not pay the EMI for a certain period of time.

Some good lending organizations will provide a longer moratorium period in order to give value to their customers. For instance, the Bajaj Finserv Home Loan Moratorium Policy provides a 3 month EMI grace period to help manage / plan monthly expenses and give a cushion to the customer to plan his finances. If the customer is a business person, then a 3 month EMI holiday will help in cash flow planning and will provide an opportunity to reinvest the same in his business.

How Moratorium Period is Connected with Home Loan?

Consider this example of a Home Loan moratorium period: Let’s say your Home Loan is for INR10,000,000.00 with 240 months at 10.40% to repay with an EMI payment amount of INR 99,167. You further choose to opt for an EMI holiday scheme from Bajaj Finserv.
Well, the Intelligent Home Loan allows you to take a holiday! You get 3 months off wherein your EMI eventually becomes INR102,154 for 237 months. Can you use your 3 months smartly? Of course you can! You can use the money for a variety of different responsibilities such as family care, student loan payoffs, reinvest in your business, vacation expenses, credit card pay offs, or your good old financial planning for the rest of the year.
What really happens here is that while you take 3 months to accumulate your finances and/or get yourself in shape for repaying the Home Loan, the housing loan interest you were to pay within the 3 months gets added to the principal amount and you start paying from the 4th month.

Loan Servicing in a Moratorium Period

Your lending institution can provide you with a moratorium period Home Loan calculator to get your figures right. You can also avail the same online. The terms & conditions on servicing of loans in the moratorium period vary from bank to bank. If you are thinking of taking a Home Loan then it is advised to sit with the respective bank authorities and discuss the complete Home Loan procedure. How much interest will be incurred, what will be the moratorium period of your Home Loan and how you can utilize that time period in repaying the EMIs are all very valuable to your financial plans as a Home Loan borrower.

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