What Happens to The Home When Home Loan Borrower Dies?

So you have taken a loan of 50 lakhs and your EMIs were being paid on time, but suddenly the borrower (who is the primary applicant) dies. What will happen to your home loan amount and, most importantly, to your home?

Let's understand this.

The first option.

First off, the bank will reach out to the borrower's closest family members or anyone who co-applied for the loan. They'll check if any of them can take over the loan payments. That's actually why banks often suggest getting a joint home loan. If something unexpected happens to one of the co-applicants, the other can keep handling the payments. It's a smoother way for banks to manage things, and they definitely prefer it if someone steps up to cover the outstanding debt.

And the second one..

Now, if the family says they can't handle the loan payments because it's just too much financially, the bank has to look at other options. They might stretch the loan period to make the monthly payments smaller. This way, the loan gets paid off over a longer time, but it eases the monthly strain on the family.

Alternatively, if the family prefers, the bank could increase the monthly payments to finish the loan faster.

The last resort...

But if all else fails, the bank's last resort is to sell the property. If they end up making more from the sale than what was owed, they'll give the extra cash back to the borrower's family.

It's a tough situation, but that's how banks typically handle it when there's no backup plan like home loan insurance.

P.S: More than 85% of new home loan borrowers are opting for some kind of insurance. Have you insured against your home loan? Read here!

Jai Hind!