Buying a home is one of the most expensive investments you are likely to make in your lifetime. With property rates reaching new heights every year, home loans have been designed to meet your need of owning a house. Once the bank gives you a home loan, they expect you to start paying your EMIs every month until the end of the loan tenure. However, what happens if you are unable to pay the EMIs? This guide will tell you what are the other things that you should keep in mind while taking a home loan, how to choose a home loan, and what are the consequences in case you have defaulted in paying EMIs.How to choose a Home Loan?Before deciding on the lender from whom you will be taking the home loan shop around for different interest rates and choose the most competitive one. Check whether the interest rate is fixed or floating. If the interest rates are fixed there will be no fluctuations but floating rates vary according to the market conditions.
Generally, the fixed rate is 25-100 points higher than the floating rates. You should opt for fixed rates if the tenure of your loan is or a short period, i.e. 2-5 years but if your loan period is very long then you must opt for a floating rate of interest as you will be able to chance upon the variations in the interest rate.
Besides the interest rate, you should also look at processing fees and conditions for pre-payment. The processing fee is the charge that the banks deduct for giving you the loan. Depending on how urgently you need the loan check the time taken by the bank to sanction and disburse the loan. To know more about how to choose a home loan you can visit BankBazaar or Paisabazaar.
What happens when you fail to pay EMI-
The first thing you need to know is that a bank will not foreclose the loan if you defaulted on one or two EMI payments. Loan foreclosure is the last action a bank wants to exercise. But if you continue to fail in paying your EMIs for three consecutive months, the bank will send you due to reminders of the same. A lack of response from your side will prompt the bank to send you a legal notice and you will be termed as a loan defaulter. Before selling off the assets of the loan defaulter the bank is responsible for issuing a notice to the lender and the lender is liable to pay within 60 day time period. Further, if you default in paying an EMI it also impacts your credit worthiness and affects your credibility when you will be taking any other loan. If you are declared as a loan defaulter-In case you become a loan defaulter the bank will start the process of seizing your property. They may auction your property and recover their due amount. The bank usually gives six months of time before auctioning off your house. Within these six months, you can approach anytime and settle the things out with Bank.
What to do in case you are declared as a loan defaulter-Ask for a moratorium period - If you want to take any action you need to take before this auction. You should meet the bank officer and explain your situation, as to why you are unable to pay the EMIs as of now. Whether due to a health issue or you lost a job, if you feel you can persuade the bank that you will get onto the track in next 3-4 months, then the bank can offer you with a moratorium period for some months.
Loan restructuring - If the reason for your financial woes is a rise in interest rates and you are finding difficulty in managing your EMIs, you can request the bank to restructure your home loan. The bank can increase the tenure of your loan and your EMI would go down.
Loan refinancing - If your bank is not ready to structure your loan and you find some other bank offering a loan at a rate that is manageable in your financial arrangement, then you can consider refinancing your loan but do calculate your exact expenses in terms of processing charges and other levies.
Liquidating your investments - The final step that you can resort to if above mentioned options do not work out is that you liquidate your existing investments such as deposits or mutual funds to pay the EMIs. You can use this amount to make part payment for the loan which will reduce the EMI in the future. You can also sell the house on which you have taken the repay the loan taken on it.
Documents required for obtaining a home loan
Your bank will direct you with all the documents needed for processing the home loan. It is advisable to keep the following documents handy if you are planning to avail a home loan.
Application form with photograph duly signed
Identity proof- This could be a passport, Aadhaar Card, voter ID card, or driving license
residence and age proof
Bank statements for last six months
Salary slips for last three months
Income tax returns
Processing fee cheque
Title deeds, copy of allotment letter, buyer's agreement, or any other property-related document.
Brief of securities charged instead of other loans taken from other lenders.
Advance payment of receipt towards the purchase of flats.
Why should you take an Insurance cover for your home loan
It is advisable that you just don't obtain a home loan. It is suggested that one must also take insurance over the home loan so taken.
Your home loan needs to be paid to the lender in an Equated Monthly installment. The liability needs to be repaid to the lender irrespective of the fact whether you are dead or alive. In the case of untimely death, the onus of giving EMIs will be shifted onto your immediate family members. Your family members will have to repay the remaining outstanding amount of the loan.
The working of a home loan insurance is similar to a term of the life insurance policy. The differentiating factor between the two insurance policies is that in the case of home loan insurance, the sum of insurance is not fixed. It is dependent upon the outstanding amount of the loan amount.
Home loan insurance helps protect your monthly loan payments if you become unemployed or suffer an accident or sickness. Loan insurance means during tough times, you'll have insurance cover to take care of the EMIs or the outstanding amount. This is extremely useful in case of death or disability due to an accident or sickness and also on the case of loss of job.Why do you need a Lawyer?
A lawyer, being an expert in the application and enforcement of laws can provide you assistance with your legal issues and can guide you through the procedure of how a case should be dealt with. He can help you formulate a strategy and effectively assist you with the execution of the same. A lawyer is well aware of the laws and having experience in dealing with similar cases can help you understand the laws and implications involved if any. He can also assist you in getting a time-bound remedy for your legal issue and can also help you make sure that any steps taken may not cause such errors that may not be even be rectified with future legal proceedings. You can also use LawRato's Free Legal Advice service to get free advice on your case from expert property lawyers.
Buying a home is one of the most expensive investments you are likely to make in your lifetime. With property rates reaching new heights every year, home loans have been designed to meet your need of owning a house. Once the bank gives you a home loan, they expect you to start paying your EMIs every month until the end of the loan tenure. However, what happens if you are unable to pay the EMIs? This guide will tell you what are the other things that you should keep in mind while taking a home loan, how to choose a home loan, and what are the consequences in case you have defaulted in paying EMIs.How to choose a Home Loan?Before deciding on the lender from whom you will be taking the home loan shop around for different interest rates and choose the most competitive one. Check whether the interest rate is fixed or floating. If the interest rates are fixed there will be no fluctuations but floating rates vary according to the market conditions.
Generally, the fixed rate is 25-100 points higher than the floating rates. You should opt for fixed rates if the tenure of your loan is or a short period, i.e. 2-5 years but if your loan period is very long then you must opt for a floating rate of interest as you will be able to chance upon the variations in the interest rate.
Besides the interest rate, you should also look at processing fees and conditions for pre-payment. The processing fee is the charge that the banks deduct for giving you the loan. Depending on how urgently you need the loan check the time taken by the bank to sanction and disburse the loan. To know more about how to choose a home loan you can visit BankBazaar or Paisabazaar.
What happens when you fail to pay EMI-
The first thing you need to know is that a bank will not foreclose the loan if you defaulted on one or two EMI payments. Loan foreclosure is the last action a bank wants to exercise. But if you continue to fail in paying your EMIs for three consecutive months, the bank will send you due to reminders of the same. A lack of response from your side will prompt the bank to send you a legal notice and you will be termed as a loan defaulter. Before selling off the assets of the loan defaulter the bank is responsible for issuing a notice to the lender and the lender is liable to pay within 60 day time period. Further, if you default in paying an EMI it also impacts your credit worthiness and affects your credibility when you will be taking any other loan. If you are declared as a loan defaulter-In case you become a loan defaulter the bank will start the process of seizing your property. They may auction your property and recover their due amount. The bank usually gives six months of time before auctioning off your house. Within these six months, you can approach anytime and settle the things out with Bank.
What to do in case you are declared as a loan defaulter-Ask for a moratorium period - If you want to take any action you need to take before this auction. You should meet the bank officer and explain your situation, as to why you are unable to pay the EMIs as of now. Whether due to a health issue or you lost a job, if you feel you can persuade the bank that you will get onto the track in next 3-4 months, then the bank can offer you with a moratorium period for some months.
Loan restructuring - If the reason for your financial woes is a rise in interest rates and you are finding difficulty in managing your EMIs, you can request the bank to restructure your home loan. The bank can increase the tenure of your loan and your EMI would go down.
Loan refinancing - If your bank is not ready to structure your loan and you find some other bank offering a loan at a rate that is manageable in your financial arrangement, then you can consider refinancing your loan but do calculate your exact expenses in terms of processing charges and other levies.
Liquidating your investments - The final step that you can resort to if above mentioned options do not work out is that you liquidate your existing investments such as deposits or mutual funds to pay the EMIs. You can use this amount to make part payment for the loan which will reduce the EMI in the future. You can also sell the house on which you have taken the repay the loan taken on it.
Documents required for obtaining a home loan
Your bank will direct you with all the documents needed for processing the home loan. It is advisable to keep the following documents handy if you are planning to avail a home loan.
Application form with photograph duly signed
Identity proof- This could be a passport, Aadhaar Card, voter ID card, or driving license
residence and age proof
Bank statements for last six months
Salary slips for last three months
Income tax returns
Processing fee cheque
Title deeds, copy of allotment letter, buyer's agreement, or any other property-related document.
Brief of securities charged instead of other loans taken from other lenders.
Advance payment of receipt towards the purchase of flats.
Why should you take an Insurance cover for your home loan
It is advisable that you just don't obtain a home loan. It is suggested that one must also take insurance over the home loan so taken.
Your home loan needs to be paid to the lender in an Equated Monthly installment. The liability needs to be repaid to the lender irrespective of the fact whether you are dead or alive. In the case of untimely death, the onus of giving EMIs will be shifted onto your immediate family members. Your family members will have to repay the remaining outstanding amount of the loan.
The working of a home loan insurance is similar to a term of the life insurance policy. The differentiating factor between the two insurance policies is that in the case of home loan insurance, the sum of insurance is not fixed. It is dependent upon the outstanding amount of the loan amount.
Home loan insurance helps protect your monthly loan payments if you become unemployed or suffer an accident or sickness. Loan insurance means during tough times, you'll have insurance cover to take care of the EMIs or the outstanding amount. This is extremely useful in case of death or disability due to an accident or sickness and also on the case of loss of job.Why do you need a Lawyer?
A lawyer, being an expert in the application and enforcement of laws can provide you assistance with your legal issues and can guide you through the procedure of how a case should be dealt with. He can help you formulate a strategy and effectively assist you with the execution of the same. A lawyer is well aware of the laws and having experience in dealing with similar cases can help you understand the laws and implications involved if any. He can also assist you in getting a time-bound remedy for your legal issue and can also help you make sure that any steps taken may not cause such errors that may not be even be rectified with future legal proceedings. You can also use LawRato's Free Legal Advice service to get free advice on your case from expert property lawyers.
These guides are not legal advice, nor a substitute for a lawyer
These articles are provided freely as general guides. While we do our best
to make sure these guides are helpful, we do not give any guarantee that
they are accurate or appropriate to your situation, or take any
responsibility for any loss their use might cause you. Do not rely on
information provided here without seeking experienced legal advice first. If
in doubt, please always consult a lawyer.
85+ Lawyers are online 
Greater Kailash - 1, Delhi
5 years
