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What Is The Process If A Home Loan Borrower Passes Away?

What happens to a home loan if the borrower dies?

As unpredictable as life is, for all those who wish to be a step ahead to secure their future, availing a home loan seems to be a good option.  A home loan allows you to have the house of your dreams without worrying about repaying the loan immediately. 

It is a wise choice to understand the scenario that would arise if the borrower untimely passes away. While this may not be quite a regular topic to discuss, it is crucial to understand the circumstances that may arise. 

When an individual avails a home loan, the general impression that they have is that there are around 20 to 30 years until they can repay the home loan. Any unfortunate event may likely occur at any time in the timeline until the entire home loan is repaid. It is always better to be prepared to tackle such unforeseen situations to avoid an unnecessary financial burden on the family.

What can happen when the borrower loses their life suddenly? 

The circumstances in such situations can turn out to be quite risky. The home loan providers tend to check if there are any co-applicants to the home loan in cases where the primary borrower passes away during the home loan tenure. Wherever there is a case of a joint housing loan, the co-applicant as a part of their duty steps up to make good the balance outstanding amount. 

There may be unfortunate circumstances where the co-applicant may not fulfill the responsibility of the repayment of the home loan. The lenders will look out for legal heirs, guarantors, and family members who can service the home loan and fulfil the responsibility. 

If anyone steps up to make the repayment, the lenders return the secured property as part of the process. However, even after reaching out to every possible party, if there seems to be no member who can clear off the dues in a specific timeline, the lenders have no choice but to seize and auction/sell the secured property. 

Communication is key-

Nowadays in order to tackle such events, the option to restructure the home loan has been made available. When the family members reach out to the lender in time, the lender reviews their position and offers restructuring of the home loan. The home loan can be restructured by way of offering EMI moratorium, extending the home loan tenure or rescheduling the EMI payments. If all goes well, the lender may even offer to revise the home loan interest rate after carefully considering the home loan account. 

Housing loan insurance 

Term insurance and separate home insurance are two of the best options to survive the worst possible situations. If the borrower signs up for a housing loan under any of these categories, it can assure that the burden will not drown the family members after their demise. 

Term Insurance: Under this option, the sum insured is paid to the registered nominee, who can then make the home loan amount and associated liabilities. 

Separate home insurance: The insurer will clear the outstanding dues of the lender directly. 

It is crucial to study the various home loan insurance plans available while keeping a keen eye on the home loan interest rates. The home loan EMI calculator can be used to understand and derive the estimated cost. The home loan EMI calculator allows you to understand the liability amount you may incur once you avail the home loan insurance. 

Conclusion

During trying times, not worrying about finances can be pretty helpful. It is essential to realise the benefit of home loan insurance as, in the long run, it helps ease the pressure off an individual, both financially and mentally.