Buying a house or any property for that matter isn’t a piece of cake. More often than not, a purchase as big as this requires careful planning and a proper payment structure that doesn’t burn holes in your pockets, leaving you dry and cashless. It is indeed vital to make sure you pay for your home in the best possible way, without running out of resources midway and subsequently losing your dream property. People make the best of easy home loans available to buy property and pay for their homes in installments i.e. EMIs (Equated Monthly Installments). Several banks in India offer quick home loan facilities that enable you to go ahead and purchase a home without too many hitches and ditches along the way.
So, you’ve bought a house, moved your furniture in and begun calling it a home, but you find yourself unable to pay the EMIs due to several unforeseen reasons. What do you do next? Well, popular belief claims that the financer steps right in and takes possession of your home. That however is not the case. Most financial institutions, depending on the situation and the reason for a stoppage in monthly payments, offer a leeway, giving the customer time to bring his/her finances back on track before continuing to pay the loan amount.
Banks have the power to invoke the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFAESI), that enable them to recover funds from non-performing assets without the court of law intervening. However, most banks prefer swaying away from this route, unless absolutely necessary, giving the customer time to pay back. Banks allow one mortgage payment default to slip by before sending in regular mails to remind customers about their late payments.
However, not responding to these mails over a period of six months will lead the financial institution to pull the drawstrings tighter and invoke the SARFAESI Act. “If the borrower doesn’t respond to any of the mails, the bank sends a legal notice through its legal department. After the end of this period, the bank can officially term the home loan an NPA and start the process of recovering the property through the SARFAESI Act. Finally, five months after the first default, the bank sends a notice, stating that it has valued the property for a certain sum and that it will auction the house on a particular date. This is usually set for a month from the date that the bank mails you the auction notice,” says VN Kulkarni, chief counsellor at Abhay Credit Counselling Centre.
However, banks are willing to connect with customers and better understand their tribulations. A loan-taker can also request a moratorium in case of a job loss and assure the bank that the EMIs will be paid regularly after a period of six months. Also, customers can restructure their loan and increase the tenure of the loan if the rising interest rates are a cause for late payments. Lastly, it is vital to keep a good track record and ensure regular EMI payments since a repayment history does affect the possibility of a future loan being considered on the bank’s part.
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