What is a home loan moratorium?

A home loan moratorium is a temporary pause or suspension granted by the lender on EMI payments for a specified period. During this period, the borrower is not required to pay the monthly instalment, although interest may continue to accrue.

When is a Moratorium Granted?

• During natural calamities or financial crises (such as the RBI COVID-19 moratorium in 2020)
• At the beginning of a loan, especially for under-construction properties
• In situations involving job loss, illness, or financial hardship, subject to lender approval

What Happens During a Moratorium?

• EMI payments are paused for the agreed period
• Interest continues to accrue on the outstanding principal amount
• Accrued interest is generally added to the loan principal (capitalised)
• After the moratorium period, EMIs may increase or the loan tenure may be extended

Types of Moratorium

1. Full Moratorium

• Both principal and interest payments are deferred

2. Partial Moratorium

• Only principal repayment is paused while interest payments continue

Important Considerations

• A moratorium is not a waiver; the borrower must still repay the deferred amount
• It offers short-term financial relief but increases the total cost of the loan
• Borrowers should carefully assess the long-term financial impact before opting for one

A home loan moratorium can provide crucial financial relief during emergencies, but borrowers should understand that deferred interest increases the overall repayment burden. It is best used only when genuinely necessary.