A recent survey showed that almost 70% of Indians rely on a Home Loan to fund the purchase of their dream home. Home Loans are convenient - you can borrow a huge sum and pay it off comfortably in the form of small EMIs. Though Home Loans are a comfortable, secure and convenient way of building a home or an appreciating asset, not everyone feels comfortable with carrying the burden of a loan. Further, the longer the tenor of a loan, the higher the total interest paid out. Thus, most borrowers try their best to prepay or foreclose their loan before the stipulated period.
Foreclosure is the process of prepaying a loan or closing it before the stipulated period by making a lump sum payment. Until a few years ago, lenders charge borrowers a hefty fee for preparing or foreclosing their loans. However, as per the new RBI mandate, individual borrowers on floating interest rates can foreclose their loan at no additional cost at any time. So, should borrowers foreclose their loans?
The answer depends on several things. If you are someone who cannot carry the mental burden of a loan and having debt gives you sleepless nights, you should foreclose your loan if you have the money. However, if loans do not burden you, you must assess whether the interest you will save by preparing the loan is substantial enough to cover up the money you will save by way of tax exemptions provided on Home Loans.
Under Section 80C of the Income Tax Act, one can claim tax deductions up to a maximum of Rs. 1.5 Lakh on payments made towards principal repayment and up to a maximum of Rs.2 Lakh on payments made toward interest repayment under section 24B of the same act. Over and above this, other sections allow borrowers to save even more money each year by way of Home Loan tax deductions. All in all, an individual can claim up to Rs.5 Lakh as an exemption while repaying a Home Loan. This is a huge amount of money - if the money you will save by foreclosing the loan is enough to cover the money you will lose in the form of taxes, foreclosing the loan would make sense.
Also Read: Factors You Need to Consider Before Foreclosing Your Home Loan
If you have decided to foreclose or prepay your Home Loan, there are a few things you must keep in mind. Let us look at the dos and don'ts of Home Loan foreclosure.
Home Loan Foreclosure Do’s
If you have decided to foreclose a loan, here are a few things that you must do.
Talk to Your Lender About Foreclosure Charges
As per the latest RBI mandate, individual borrowers who are on floating interest rates can foreclose their loans at no additional cost. Similarly, individual borrowers who are on the fixed interest rate can foreclose their loan at no additional cost if they use their savings to foreclose the loan. However, certain lenders do charge Home Loan foreclosure fees in certain specific cases. If you have decided to foreclose the loan, talk to your lender about foreclosure charges and do a cost-benefit analysis before closing the loan.
Inform Your Lender of Your Intention to Foreclose the Loan
Once you have decided to prepay or foreclose the loan, write to your lender informing them of your intention to do so. Your application must contain your name, address, loan account details and other important details. Once your lender receives the letter, they will inform you about the outstanding amount. Clear the outstanding amount and foreclose your loan.
Read Also: Differences Between Fixed and Floating Interest Rates
Home Loan Foreclosure Don'ts
Here are a few things you shouldn't do while foreclosing a loan.
Forgetting to Collect All Original Documents
When you opt for a housing loan, the lender keeps the original copy of several property-related documents, such as the title deed, sales deed, etc. While foreclosing the loan, remember to ask your lender to return all the original documents they have with them.
Not Taking the No-Objection Certificate
The No-Objection Certificate is an important legal document that serves as proof that you have cleared your loan in its entirety and the property in question now belongs solely to you. You will need NOC to settle any wrongful claims on your property as well as if you ever decide to take another Home Loan. So, remember to ask your lender for this document.
Also Read: Importance of NOC Letter after Paying off Your Home Loan
Not Getting Your Credit Score Updated
Once you have repaid your Home Loan, inform the credit information bureaus. Clearing a loan is a huge thing and loan repayment can have a huge positive impact on your credit profile. Thus, as soon as you have repaid a loan, inform the credit information bureau and have them reassess your credit score.
Final Words
Foreclosure is an important step in your Home Loan journey, one that must be taken after careful financial planning. If you have decided to take this step, remember to keep in mind the do's and don'ts mentioned in this article.
DISCLAIMER:
While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent errors or delays in updating the information. The material contained in this website and on associated web pages, is for reference and general information purposes, and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. Neither Bajaj Housing Finance Limited nor any of its agents/associates/affiliates shall be liable for any act or omission of the Users relying on the information contained on this website and on associated web pages. In case any inconsistencies are observed, please click on contact information.
Content with tag .
Trending Articles
home+loan Home Loan
[N][T][T][N][T]
Is It Mandatory to Take Insurance with a Home Loan?2023-08-01 | 5 min
home+loan Home Loan
[N][T][T][N][T]
How to Pick the Best Home Loan Tenor that Suits Your Budget2023-06-29 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Understanding Stamp Duty and Property Registration Charges2022-06-29 | 5 min
home+loan Home Loan
[N][T][T][N][T]
How to Pay Off Your Home Loan Quicker2022-06-29 | 6 Min
home+loan Home Loan
[N][T][T][N][T]
How Digital Platforms Are Revolutionising the Face of Housing Finance2023-02-02 | 7 min
home+loan Home Loan
[N][T][T][N][T]
Advantages of Including a Co-Applicant on Your Home Loan2023-02-21 | 7 min
home+loan Home Loan
[N][T][T][N][T]
How to Connect with Bajaj Housing Customer Care2023-06-27 | 5 Min
home+loan Home Loan
[N][T][T][N][T]
ITR Filing for Home Loan – Know the Right Process to File Your Income Tax Returns2023-02-16 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Secured vs Unsecured Loan - Know the Difference2023-08-24 | 2 min
home+loan Home Loan
[N][T][T][N][T]
Common Mistakes to Avoid When Applying for A Home Loan2023-08-10 | 2 min
home+loan Home Loan
[N][T][T][N][T]
How to Choose the Best Home Loan?2023-08-09 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Pros and Cons of Taking A Joint Home Loan with your Spouse2023-08-10 | 7 min
home+loan Home Loan
[N][T][T][N][T]
Making Financial Planning Easy with Home Loan EMI Calculator2023-09-06 | 2 min
home+loan Home Loan
[N][T][T][N][T]
Difference Between Bank Rate and Repo Rate2023-09-22 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Increase or Decrease Effects of Repo Rate2023-08-29 | 7 min
home+loan Home Loan
[N][T][T][N][T]
Difference Between Co-owner, Co-borrower, Co-Applicant, and Co-Signer in Home Loan2023-08-31 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Understanding the Benefits of a Home Loan EMI Calculator2023-07-12 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What Happens If Home Loan EMI Bounces? Know the Consequences2023-07-11 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Tips to Avoid Rejection of Your Home Loan Application2023-08-01 | 3 min
home+loan Home Loan
[N][T][T][N][T]
Check Housing Loan Eligibility with Home Loan Eligibility Calculator2023-07-12 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Advantages for First-Time Home Buyers2023-07-14 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Tips to Get Home Loan with Minimum Down Payment in India2023-07-11 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What is the Ideal Down Payment for a Home Loan?2023-06-16 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Factors That Determine Your Home Loan Eligibility2023-07-24 | 8 min
home+loan Home Loan
[N][T][T][N][T]
What Is Home Loan Eligibility and How Is It Calculated2023-07-11 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Differences Between Repo Rate and Monetary Policy Tools2023-07-28 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What Happens to a Home Loan in the Case of the Borrower's Death?2023-04-17 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Taking a Home Loan to Buy a Property for Investment? Here Are 5 Points to Consider2023-04-17 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Should I Apply for a Pre-Approved Home Loan or an After Property Finalisation Loan?2023-03-23 | 5 min
home+loan Home Loan
[N][T][T][N][T]
5 Great Ways Women Can Benefit from Taking a Housing Loan2023-04-25 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What Do You Need to Know About Home Loan Foreclosure?2023-03-23 | 5 min
home+loan Home Loan
[N][T][T][N][T]
A Complete Guide for Home Loan Insurance2023-04-03 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Know All About the HRA Benefit on Payment of House Rent2023-04-03 | 6 min
home+loan Home Loan
[N][T][T][N][T]
How to Determine Your Ideal Credit Score for a Home Loan?2023-03-30 | 4 min
home+loan Home Loan
[N][T][T][N][T]
How to Get a Housing Loan Approved Instantly?2023-04-12 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What is the Process to Get Your Home Loan Approved Fast with Bajaj Housing Finance?2023-02-15 | 6 min
home+loan Home Loan
[N][T][T][N][T]
A Guide to Statutory Liquidity Ratio2023-02-22 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Get Your Down Payment Funds Ready with These 5 Easy Steps2023-03-20 | 5 min
home+loan Home Loan
[N][T][T][N][T]
5 Strategies to Manage High Home Loan EMIs Effectively2023-02-22 | 6 min
home+loan Home Loan
[N][T][T][N][T]
5 Tips for Lowering Home Loan Interest Rates in 20232023-03-28 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Why Is Credit Score Important for Home Loan Lenders?2023-03-21 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Importance Of a Good Credit Score in The Home Loan Process2023-03-20 | 4 min
home+loan Home Loan
[N][T][T][N][T]
How Do You Overcome Home Loan Repayment Burden?2023-02-13 | 2 min
home+loan Home Loan
[N][T][T][N][T]
Difference Between Home Loan and Personal Loan: Which is better?2023-02-09 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Home Loan EMI Calculator Benefits and It’s Features2023-02-21 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Everything You Need to Know About Top-up Loans on a Home Loan2023-02-20 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Why Paying Home Loan EMI is Better Than Renting a Home?2023-02-20 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Should You Take a Home Loan Even If You Have Enough Money to Buy a House?2023-01-30 | 3 min
home+loan Home Loan
[N][T][T][N][T]
4 Key Benefits of Home Loan Balance Transfer to Bajaj Housing Finance Limited2023-01-09 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Best Credit Score for Home Loans & How to Improve Yours2023-08-31 | 6 min
home+loan Home Loan
[N][T][T][N][T]
How Can Your Credit Score Impact Your Home Loan Interest Rate?2023-02-17 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Section 80 EE: Claim Deductions on the Home Loan Interest Paid2023-02-17 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Ways to Check Bajaj Housing Loan Account Numbers2023-01-19 | 3 min
home+loan Home Loan
[N][T][T][N][T]
Benefits of Submitting a Digital Home Loan Application in Current Times2023-02-17 | 4 min
home+loan Home Loan
[N][T][T][N][T]
10 Smart Steps for Effective Home Loan Management2023-02-17 | 5 min
home+loan Home Loan
[N][T][T][N][T]
10 Factors That Affect Your Home Loan Eligibility2023-01-09 | 7 min
home+loan Home Loan
[N][T][T][N][T]
Are Registration Charges Compulsory When You Opt for a Home Loan?2023-02-10 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What Are the Pros and Cons of Home Loan Balance Transfer?2023-02-01 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Five Important Factors to Keep in Mind When Prepaying Your Home Loan2023-01-17 | 6 min
home+loan Home Loan
[N][T][T][N][T]
A Step-by-Step Guide to Home Loan Balance Transfer Application2022-12-20 | 6 min
home+loan Home Loan
[N][T][T][N][T]
How to Get a Better Interest Rate on Your Home Loan2023-01-04 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What is the Difference Between Top-up Loan and Home Improvement Loan2023-01-11 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Importance of an NOC Letter after Closing Your Home Loan2022-12-12 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Factors to Consider Before Opting for Home Loan Balance Transfer2022-12-14 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Top Things to Keep Track of While Doing a Home Loan Balance Transfer2022-12-18 | 7 min
home+loan Home Loan
[N][T][T][N][T]
All You Need to Know About Home Loans2023-01-19 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What Is a Pre-Approved Home Loan and How Should You Get It Done?2023-11-15 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Home Loan vs Loan Against Property: A Complete Comparison2023-11-29 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Hybrid Flexi Loan vs Personal Loan: Which one is Better?2023-06-30 | 3 min
home+loan Home Loan
[N][T][T][N][T]
Understanding Loan-to-Value Ratio (LTV) and its Calculation2023-11-28 | 4 Min
home+loan Home Loan
[N][T][T][N][T]
A Complete Guide on the Benefits of Joint Home Loan2022-11-16 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Smart Things to Consider Before You Apply for a Home Loan2022-12-14 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Can I Take a Home Loan and a Personal Loan Together?2022-12-13 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Common Myths About Home Loans: All You Need to Know2022-12-15 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Factors to Consider Before Applying for a Home Construction Loan2022-12-02 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Know All About the Home Loan Foreclosure Procedure2022-11-16 | 5 min
home+loan Home Loan
[N][T][T][N][T]
6 Point Differentiation Between Home Loan Vs Home Construction Loan2023-02-15 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Home Loan Balance Transfer: Benefits, Eligibility, and More2023-10-14 | 3 Min
home+loan Home Loan
[N][T][T][N][T]
Consider These Factors Before Foreclosing Your Home Loan2023-09-29 | 3 min
home+loan Home Loan
[N][T][T][N][T]
Complete Guide to Securing a Attractive Interest on Home Loans2023-10-31 | 3 min
home+loan Home Loan
[N][T][T][N][T]
All You Should Know About Home Loan Disbursement and Sanctioning Process2023-06-23 | 3 Min
home+loan Home Loan
[N][T][T][N][T]
What Affects the Interest Rate on Your Home Loan2023-11-06 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Differences Between Fixed and Floating Interest Rates2023-06-27 | 2 min
home+loan Home Loan
[N][T][T][N][T]
7 Common Problems You May Face While Applying For Home Loan2023-10-16 | 7 min
home+loan Home Loan
[N][T][T][N][T]
Home Loan Burden Management: Five Tips2022-06-27 | 3 min
home+loan Home Loan
[N][T][T][N][T]
Which is the Best Option: Land Purchase Loan or Home Loan?2023-02-01 | 6 min
home+loan Home Loan
[N][T][T][N][T]
10 Reasons Why a Housing Loan Application May Be Rejected2023-02-20 | 3 min
home+loan Home Loan
[N][T][T][N][T]
How to Access Your Login Details in Bajaj Customer Portal?2023-02-02 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Home Loan Refinancing: What, Why, and Things to Remember2022-06-16 | 5 Min
home+loan Home Loan
[N][T][T][N][T]
Why Should You Choose a Balance Transfer on Your Home Loan?2023-02-01 | 4 min
home+loan Home Loan
[N][T][T][N][T]
What Factors Decide Your Home Loan Interest Rates?2023-05-29 | 6 min
home+loan Home Loan
[N][T][T][N][T]
All About Home Loan Balance Transfers2022-06-22 | 4 mins
home+loan Home Loan
[N][T][T][N][T]
An Essential Guide to Refinancing a Home Loan2022-06-15 | 5 Min
home+loan Home Loan
[N][T][T][N][T]
6 Ways to Reduce Your Home Loan Interest2023-01-26 | 4 min
home+loan Home Loan
[N][T][T][N][T]
What Is an NOC Letter And Why Is It Important?2022-06-07 | 3 min
home+loan Home Loan
[N][T][T][N][T]
Types of Home Loan Charges2022-06-27 | 3 Min
home+loan Home Loan
[N][T][T][N][T]
What are the Different Types of Loans Available in India?2022-06-28 | 5 Min
home+loan Home Loan
[N][T][T][N][T]
How to Calculate Home Loan EMIs2022-06-14 | 5 Mins
home+loan Home Loan
[N][T][T][N][T]
Home Loan Terminologies2022-06-14 | 3 min
home+loan Home Loan
[N][T][T][N][T]
Get a Home Loan Without Visiting Branch: A Step-by-Step Guide2023-02-08 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Top 5 Home Loan Benefits for First-time Woman Buyers2023-07-24 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Would it be Possible for Me to Apply for a Second Mortgage?2022-06-27 | 3 min
home+loan Home Loan
[N][T][T][N][T]
The Importance of a Home Loan NOC2023-01-31 | 7 min
home+loan Home Loan
[N][T][T][N][T]
How to Check Your Bajaj Housing Finance Home Loan Status2022-06-22 | 4 Min
home+loan Home Loan
[N][T][T][N][T]
Five Tips to Choose the Right Digital Platform for Home Loans2023-02-09 | 3 min
home+loan Home Loan
[N][T][T]Types[S]of[S]Home[S]Loans[S]Available[S]in[S]India[N][T]
Types of Home Loans Available in India2022-06-28 | 5 Min
home+loan Home Loan
[N][T][T][N][T]
How to Pick the Best Home Loan Tenor that Suits Your Budget