ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Though there wouldn’t be any difference initially, foreclosing a loan will have a lasting effect on your credit score due to your repayment history. Prepayments towards home loans are considered for tax deduction as they are, in principle, repayment towards the principal amount of the home loan.

Detailed explanation-2: -A foreclosure is simply the closing of a Home Loan by paying off the entire amount borrowed in one lump sum amount. It is part of the regular Home Loan process and allows you to pay off the borrowed amount before the EMI schedule. You can opt for a foreclosure even after having made a few EMI payments.

Detailed explanation-3: -Short Sale. If you don’t want or need to hold on to the home, then a short sale could be another alternative to a deed in lieu of foreclosure or a foreclosure proceeding. In a short sale, the lender agrees to let you sell the home for less than what’s owed on the mortgage.

Detailed explanation-4: -When a borrower repays the entire outstanding loan amount in one payment rather than in EMIs, they need to write a letter for the foreclosure of the loan, which is known as the foreclosure letter.