Home loans are large size loans and if the person who has taken the loan dies, it could be shattering for the legal heir.
However, since these loans run into many years like 10, 20 and 30 years, anything could happen during the intermittent period.
Who actually pays your home loan after death?
If you have a loan that is outstanding, and you die, your legal heir is bound to pay from the assets.
However, if you have not left any assets, than God Bless your legal heir. It is therefore imperative these days, to make sure you take a good and sizeable amount of insurance that can payoff your home loan and save your valuable real estate.
What happens to the home loan if there an ailment?
Insurance money will come only after death. What happens if there is a sudden terminal illness and the home loan installment stands due.
In such cases, one will have to talk to the lender, that is the housing finance company or the bank concerned. It would all depend on the processes and procedures at the bank.
They might restructure the loan or offer a few EMI holidays. However, beyond that it looks doubtful they would consider anything too dramatic. One would have to find solutions to keep paying the EMI.
What will the bank do on the home loan in case of death?
In case of death there is a co-applicant on the home loan, he or she would have to start bearing the entire burden. This means there could now be two loan EMIs, that the co-applicant would have to make good.
In case that is not possible or the amount of insurance too is not able to make good the amount, the bank would proceed to sell the asset and recover the loan amount.
That is certainly not good for the home loan borrower after his or her death.
Bank may delay sale of the property
The bank would not like to immediately initiate a sale of the property. One can negotiate, talk and try to find solutions. They may look at a restructuring and or some EMI holidays. It is doubtful that the bank would take any haircut on the loan amount.
Different types of insurance policies that are available
Among the most important reasons that you would not be able to pay a home loan is either death or some form of illness. You can get insurance coverage for both of these.
In fact, most banks and housing finance institutions insist on adequate insurance before they sanction your home loan.
Before taking a home loan make sure that yoru term insurance policy is more than enough to cover the entire home loan amount. This would mean that your insurance cover is enough to cover the home loan in case od death.
These days many home loan companies provide with buil-in insurance to protect the home loan borrwoer from any eventuality.
In any case insurance is a must and is really non negotiable.