8 Things You Should Remember While Pre-Closing A Home Loan: Many people want to pay their mortgage on the first occasion. There is a strong sense of relief and pride that someone gets into repaying a home loan and officially calling the property theirs. With the recent announcement of RBI and NHB to extending the elimination of prepayment charges for home loan foreclosure, home loan borrowers have been encouraged to pay their mortgage before the end of the home loan tenure.
Before foreclosure of the loan, we need to understand that just paying off the pending payments to our credit partners is not enough and our duty is not complete. There are procedures from which the borrower should adhere to and ensure a smooth foreclosure and avoid any impact on future home loans should be kept in mind. If you fail to meet all the required formalities, then it may become the main reason for the concerns as in the future. To simplify your life, here is a checklist of some important things needed to keep you in mind while closing your home loan:
1) Take All Your Original Documents Back From the Lender:
At the time of availing a home loan, you must have submitted some of your property papers in the bank like the sale deed, mother deed, etc. and also some KYC documents in Original. So once you have paid off your full debt, you need to take back all those original submitted documents from the bank or your lending institute. The bank personnel doesn’t entertain customers later, therefore it is important to check all the documents on the spot, check they are in proper shape and no important document is missing. The same thing goes for your post-dated checks if you are pre-closing your home loan in all probability your bank will have extra post-dated checks. Therefore, do not forget to collect them at the time of pre-closure of your home loan.
2) No Objection Certificate (NOC):
No Objection Certificate (NOC) is an important certificate which states that there is an evacuation note from your bank that your property is debt free and the bank or lender does not have any interest in your property. Before receiving the certificate, you can instruct the bank to include a loan free property clause in the NOC. In addition, when you get the certificate, it specifically mentions your name, address, home loan account number, date of loan closure etc.
3) Make an Estimate of the Final Settlement:
Be present when the bank officer is calculating your final settlement. It helps you keep track of everything and detects whether there are additional charges that can be avoided. Also, keep in mind that pre-payment charges do not apply on most home loans.
4) Lien:
Many banks register a lien on the borrower’s property in the registrar’s office and thus it is legally binding and prevents the borrower from selling the property. Once you have repaid the loan, ask the bank to obtain a lien from your property. It takes up to 10 days for the lien to be removed from the record.
5) Be Prepared to Pay a Little More to Get Estimates On Your Last Payment:
The bank or the lending institute can ask you to pay a little more than the original amount. This includes interest charges which apply to your final contract cheque. The last amount will always be more than what you count as it takes a few days to clear the cheques. So, it is better to be ready for it.
6) Encumbrance Certificate:
The encumbrance certificate is a legal document that reflects all monetary transactions related to the property and once the payment of the loan has been paid off, the same must reflect on the encumbrance certificate. Once the loan is prepaid, and after the removal of the lien (if any), you need to get a new encumbrance certificate issued from the office of the registrar.
7) Legal Clearance Certificate:
If you intend to sell the house, obtaining a legal clearance certificate from the lawyer will speed up the process and increase your credibility. Once you have all your documents, it is more important to get a separate folder and keep these documents securely.
8) Be Sure to Recheck Everything:
It is very advisable to re-examine everything because it can help you avoid frequent visits to the bank later. To make sure you do not leave anything incomplete, check all documents and everything related to your loan.
