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What is Home Loan foreclosure?

Home Loan foreclosure is repaying a housing loan before the tenure ends, effectively closing the loan account.

What are the common reasons for Home Loan foreclosure?

The most common reasons include:

  • Financial windfalls (bonuses, inherited funds).
  • Reducing financial burden.
  • Availing better opportunities by clearing liabilities.
What are the different types of foreclosure?

Foreclosure can involve full loan repayment, partial loan repayment, or outright sale of the property to repay the remaining loan balance.

Is it possible to foreclose a Home Loan?

Yes, a Home Loan can be foreclosed by repaying the outstanding principal per your lender's guidelines.

Is there any penalty for foreclosure of a Home Loan?

Penalties depend on the type of loan. Lenders may charge foreclosure penalties for fixed-rate Home Loans, while floating-rate loans are exempt as per RBI guidelines.

What happens to my credit score after Home Loan Foreclosure?

A Home Loan foreclosure positively impacts your credit score by showcasing your financial stability and responsible repayment behaviour.

What are some alternatives to Home Loan Foreclosure?

Alternatives include partial prepayment, refinancing, or continuing with regular EMI payments to maintain liquidity.

Which is better—prepayment or foreclosure?

This depends on your financial goals. Prepayment reduces the principal amount, potentially lowering your EMI, while foreclosure finishes the loan.

What are Home Loan foreclosure charges?

These are processing fees levied by the lender when the borrower closes the housing loan before the originally agreed tenure.

Why do lenders impose foreclosure charges on Home Loans?

Lenders impose these charges to compensate for the loss of interest income they would have earned over the loan’s tenure.

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