Moratorium Period and Its Implications
Jun 01, 2017 Home Trading Steps
When it comes to real estate there are many jargons that are very difficult for the general public to understand. Moratorium period is one such example. In the world of financial institutions and banks, it is a very common term.
We discuss everything that a buyer should be aware of regarding the moratorium period.
Moratorium period:
To explain it in simple words, moratorium period is the period in which the buyer is free from paying any EMI. It’s like ‘EMI holiday’. Buyers usually opt for this when the projects get delayed for a certain period of time and the buyers are not in the position to pay both the EMI and the rent. Even though the EMI of the loan starts as soon as the loan amount is disbursed to the buyer, but buyers sometimes opt to pay the EMIs later.
Previously only education loans were based on this idea. ‘Take loan now, pay later’. But now the banks have come forwards and have started to use this method for home loans as well. Home loans now have a fixed moratorium period which helps the buyer to pay off their home loan debt later. For example, if the construction of the project is delayed then the bank can allow you to go on an EMI holiday based on the agreement between the bank, the builder and the buyer. The grace period of the property under construction is usually 18 months or till one month after possession, whichever is earlier. If the property is ready to move, then the moratorium period can be as short as 30 days.
To attract more customers, few banks have even started the schemes where the moratorium period is as long as three years. Buyers can negotiate the moratorium period with the bank to suit their own requirement. Though, it is advised that you should start paying the EMI as soon as the loan amount is disbursed to your account, to get the discount on the lending rate.
Should you consider moratorium period?
As easy and pocket friendly moratorium period seems to be, buyers should know that they need to pay the interest during this grace period which is charged monthly or quarterly on simple interest, depending on the bank or the financial institution.
However, if the buyer decides to defer the entire amount, the interest that is charged during the moratorium period all adds up to the borrowed amount and it gets adjusted in the monthly EMIs later. In usual scenarios, the interest can up as much as 10% of the total sum of the principle amount.
Moratorium period and No EMI period are closely related. The developer pays for the grace period on the terms negotiated by the bank, the developers and the buyer.
We discuss everything that a buyer should be aware of regarding the moratorium period.
Moratorium period:
To explain it in simple words, moratorium period is the period in which the buyer is free from paying any EMI. It’s like ‘EMI holiday’. Buyers usually opt for this when the projects get delayed for a certain period of time and the buyers are not in the position to pay both the EMI and the rent. Even though the EMI of the loan starts as soon as the loan amount is disbursed to the buyer, but buyers sometimes opt to pay the EMIs later.
Previously only education loans were based on this idea. ‘Take loan now, pay later’. But now the banks have come forwards and have started to use this method for home loans as well. Home loans now have a fixed moratorium period which helps the buyer to pay off their home loan debt later. For example, if the construction of the project is delayed then the bank can allow you to go on an EMI holiday based on the agreement between the bank, the builder and the buyer. The grace period of the property under construction is usually 18 months or till one month after possession, whichever is earlier. If the property is ready to move, then the moratorium period can be as short as 30 days.
To attract more customers, few banks have even started the schemes where the moratorium period is as long as three years. Buyers can negotiate the moratorium period with the bank to suit their own requirement. Though, it is advised that you should start paying the EMI as soon as the loan amount is disbursed to your account, to get the discount on the lending rate.
Should you consider moratorium period?
As easy and pocket friendly moratorium period seems to be, buyers should know that they need to pay the interest during this grace period which is charged monthly or quarterly on simple interest, depending on the bank or the financial institution.
However, if the buyer decides to defer the entire amount, the interest that is charged during the moratorium period all adds up to the borrowed amount and it gets adjusted in the monthly EMIs later. In usual scenarios, the interest can up as much as 10% of the total sum of the principle amount.
Moratorium period and No EMI period are closely related. The developer pays for the grace period on the terms negotiated by the bank, the developers and the buyer.
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