Investment mantra 65: Would it be okay to restructure a home loan?


Akhilesh Johri, 36, lives in a two-bedroom flat in Ghaziabad with his mother, wife, and two children, which he bought in 2013. He is repaying home loan installments of Rs 20 lakh. Apart from this, he is also paying installments of a car loan of Rs five lakh in 2018. He is a software engineer himself and his wife teaches tuition.

We know that EMI (monthly installments) allows the borrower to repay a large amount of the loan in small portions over a fixed period. The Reserve Bank has put in place strict rules that ensure that the borrower cannot borrow more than the ability to pay.

How much loan you can take depends on your income. But for you, it is suggested that before taking a loan, you should make sure that the loan installments do not exceed 40% of the salary taken to your home. This amount can be different for different people and the loan term also but do not limit this figure here, you will get help in paying the debt.

The Corona epidemic has affected people's income and raised concerns about future income, in view of which the government offered moratorium, installment waiver, and loan restructuring to help the borrowers. Meanwhile, the tuition of the jeweler's wife has also stopped due to the lockdown.

Moratorium and Re-structure-

A moratorium is a period when the borrower does not have to pay. Keep in mind that this is only a short-term exemption, you have to repay the debt. During the lockdown, the Reserve Bank announced to provide three to six months moratorium to the borrowers, but it is not free. By availing the exemption in the EMI period, your loan repayment installments increase for a few months.

The Reserve Bank has directed the lender, ie banks, to re-structure the people of such savvy borrowers who have paid their debts without default and without delay till March 2020. This will give the borrowers the option of increasing the payment for a period of two years by reducing the EMI amount of their existing loan.

If your income has decreased or you see such a scenario in the future, then you can take advantage of it.

How will it affect

The total period of exemption in the Moratorium ie EMI is six months. In its order, the Reserve Bank had clarified that the schedule of payment of the people would be changed based on the period for which the borrower takes a discount. Along with this, the Reserve Bank had also clarified that the interest of installments during the moratorium period will continue to add up.

The total tenure of your loan can be extended by two years on restructuring the loan. Paying less EMI in this period will save you money to spend. If you are struggling with a money crisis for monthly expenses, then you should choose this option. More such schemes may come in the future, keep an eye on it.

Let's try to understand the financial impact of these schemes on home loans of Rs 20 lakh. The EMI for a 20-year loan at an interest rate of eight percent will be Rs 16,729. If you take a three-month moratorium with the same EMI. So you have to pay two months extra. If you want to limit the period to 240 months, your EMI will increase by Rs 337 to Rs 17,066 per month.

Remember that the loan will have to be paid more to those who have recently taken a loan, as a large part of the EMI goes on interest in the initial years.

Loss of Moratorium and Re-structure-

Interest on the debt will continue to increase.

Your loan repayment period will increase.

This will affect your future credit rating.

Exemption in lieu of home loans may be affected.