The Secrets of Home Loan Foreclosure: 8 Things You Need to Know
03-04-2023
Home loan foreclosure is the process of closing a home loan account before the end of the loan tenure, by paying off the outstanding amount in full.
A foreclosure can be done by either making a lump-sum payment or by selling the property and using the proceeds to repay the outstanding loan amount.
Foreclosing a home loan can help save on interest costs, as interest is calculated on the outstanding loan balance.
Many banks and financial institutions levy a prepayment or foreclosure penalty for early repayment of the loan. However, the Reserve Bank of India has mandated that no foreclosure charges can be levied on floating-rate home loans.
Before foreclosing a home loan, it is important to check the foreclosure clause in the loan agreement and understand the process and charges involved.
It is important to obtain a foreclosure certificate from the lender after the outstanding loan amount has been paid off, to ensure that the loan account is closed and the property papers are returned.