'If the loan is overdue for 60 days, the bank can auction the house'. So how can you save your property mortgaged for a home loan?

For most Indians, a home isn't just a roof over their heads; it's a symbol of stability, security, and dreams. Access to housing finance has expanded in recent years, and people from various income groups are now mortgaging their homes to obtain loans. This move offers the benefit of lower interest rates and longer repayment periods. However, it also carries a significant risk.

If loan installments aren't paid on time, the bank can seize the very home that's been collateralized. In such a situation, hope alone isn't enough to protect your property; financial discipline, an understanding of the rules, and solid planning are essential.

The Reserve Bank of India (RBI) recognizes that taking on excessive debt against a property can be risky. Therefore, it has set a Loan-to-Value (LTV) limit.

For loans up to ₹30 lakh, banks will only lend up to 90% of the property's value.

For loans between ₹30 lakh and ₹75 lakh, it will only lend up to 80%.

Up to 75% on loans over ₹75 lakh.
Stamp duty and registration charges are not included in this, except for properties valued at less than ₹10 lakh.

This means that if your home is valued at ₹50 lakh, you will receive a maximum loan of ₹40 lakh; the remaining amount will have to be paid out of your own pocket. This system is designed to ensure that families are not burdened with debt if property values ​​decrease or income falls.

Interest Rate and Benchmark
The cost of the loan, i.e., the interest rate, is crucial. Since October 2019, all floating-rate home loans have been linked to the RBI repo rate. The repo rate is 5.50% until August 2025, and major public sector banks offer loans at an interest rate of approximately 7.5% per annum.

Fixed-rate loans offer stability but are expensive. Floating-rate loans may be cheaper, but they can also become more expensive if policy changes occur. Therefore, when budgeting, it's important to account for both EMI and interest rate increases.

It's Very Important to Read the Agreement
Home loan agreements are extremely complex. They contain numerous conditions that can increase future financial burdens—such as the reset period on floating loans, spreads above the benchmark, scheme switching fees, late payment penalties, etc.

The RBI has also advised banks not to provide upfront disbursement for incomplete buildings, but to release the entire loan in installments based on the construction process. This can help buyers avoid fraud by builders.

Responsible Borrowing
Banks approve loans based on age, income, and credit score, but the real responsibility lies with the borrower. Financial experts advise that EMIs should not exceed 30-40% of your monthly income. Otherwise, even a slight decrease in income can cause problems.

A good credit score (750+) facilitates loan approval and can also lower interest rates. Additionally, since 2012, the RBI has removed prepayment penalties on floating-rate loans, meaning you can reduce your interest burden by repaying a portion of the loan at any time.

Insurance: The Greatest Safety Shield
Surprisingly, less than 3% of homes in India are insured, while incidents like floods, fires, and thefts are constantly increasing. Therefore, consider home insurance a must. Also, consider term insurance that covers the remaining loan amount, so that your family is not burdened in the event of an unforeseen event.

Home Maintenance and Value
A mortgaged property is only as strong as its condition. If the home is not maintained, its market value will decrease, making it difficult to obtain a refinancing or top-up loan. Minor repairs, security upgrades, and regular servicing maintain the home's value.

If the loan is 60 days overdue...
The past decade has taught us that events like a pandemic, job loss, or business downturn can strike unexpectedly. In such a situation, it is advisable to always maintain an emergency fund equivalent to at least 3 to 6 months' EMI.

Also, it is important to understand the SARFAESI Act, 2002. If the loan remains delinquent for 60 days, the bank has the right to seize and auction the home. Therefore, it is better to talk to the bank in time and seek restructuring or a moratorium. Staying silent is the worst possible step.

A final lesson for loan borrowers:
Your home should give you strength, not a burden. If a home loan is taken with caution, foresight, and discipline, the home will always be a symbol of security, not danger.

Disclaimer: This content has been sourced and edited from Dainik Jagran. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.