Home loan dues of a deceased person: Co-borrower or legal heir must repay the bank

home loan dues of a deceased person co borrower or legal heir must repay the bank

Sumary of Home loan dues of a deceased person: Co-borrower or legal heir must repay the bank:

  • Check the home loan documents thoroughly to see if the deceased borrower had taken a home loan insurance.
  • “A home loan insurance is a guard against the risk of default in the event of the untimely demise of the borrower.
  • Because of such uncertainty, during the loan tenure, the insurance company will settle any outstanding amount on the home loan with the lender,” says Adhil Shetty, CEO of BankBazaar.
  • Lenders mainly offer two types of home loan insurance policies – a reducing balance plan or a level cover plan.
  • In a reducing balance insurance plan, the coverage and outstanding loan reduce with the tenure.
  • “In the reducing balance plan, when there is a claim because of the demise of the borrower, the insurance firm settles the outstanding dues of the bank,” says Atul Monga, Co-founder and CEO of BASIC Home Loan.
  • In a level cover plan, the insurance cover remains the same throughout the loan tenure.
  • Let’s say the deceased borrower had taken an insurance cover of Rs 1 crore against a home loan.

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