How to close a home loan without complications? – Adviser Forbes INDIA



A home loan is a commitment that comes with the joy of creating a lifelong asset for yourself. You have been waiting years to save money and use it to buy your dream home. A mortgage can help you make that dream come true. However, every person who takes out a home loan always wants to get rid of it as soon as possible, depending on their financial situation, in order to fully own their home in their own name – their own debt-free home with absolute ownership.

To make this possible, the Reserve Bank of India has allowed borrowers to make any amount of prepayments during the life of the loan, without any prepayment fees, to help Indians close their loans as soon as possible. There are some who continue to lend a full term loan that they have taken advantage of and allow the loan to close naturally. In any scenario, prior to closure or natural closure, you need to take care of several critical aspects in order to have hassle-free ownership and ease of transfer in the future.

This due diligence should begin as soon as your final installment or your final collection payment is made. After confirming the last loan payment, you need to inform your lender that you want to complete the closing formalities. Make an appointment to visit your lender and use the checklist below to ensure you don’t miss any aspect of the closing formalities.

1. Proof of Loan Closure or No Objection Certificate / No Fee Certificate

A home loan is a commitment, and there is evidence to pay off every commitment. This proof is called proof of loan closure, no objection certificate or no contribution certificate. This document is issued by the financial institution or bank lending you money on its letterhead, which states that your loan is closed and there is no obligation for this loan to your name. Make sure this document contains the following information:

  • Your name
  • Your loan account number
  • Your contact address
  • The address of your mortgaged property
  • Loan amount provided
  • Outstanding balance – zero
  • Loan issue date
  • Loan closing date

Once the lender issues a certificate to you, their right to charge you monthly payments (EMI) ceases. They also have no right to your property.

2. Initial property documents of the mortgaged property

When you took advantage of the repayment of the loan, it may have been secured by your property, on which you may have transferred the originals of the property documents to a financial institution for safekeeping. Instead, the lender would provide you with a list of documents (LOD). Take this LOD with you when visiting the lender to complete closing formalities and match the physical documents to this list.

If you can’t find your LOD or have never taken a LOD from a lender, you have nothing to worry about. The lender will provide you with the LOD at the time the documents are returned and each physical document will be matched against it. They will force you to sign a supporting document on one set of LODs as proof that all documents have been transferred to you.

Be very careful when checking documents and make sure your ownership chain matches the one you submitted and no document is missing from the link. Some of the documents you need to check include:

  • Allocation letter
  • Payment receipts
  • Transfer act
  • Contract of sale
  • Lease contract
  • Gift card
  • Transfer act
  • Ownership letter

Make sure the documents are intact and in good condition as they were sent by you to the lender. Some lenders may combine proof of loan closure and LOD as a single document and attest to it.

3. Unused PDC security

While you got the loan, the lender should have taken some undated security checks from you in addition to the ECS / ACH for regular repayment. These checks are used by the lender in the event that the borrower defaults on monthly payments. In case you have never defaulted on maturity, your checks will remain intact with the lender. Remember to collect these checks and destroy them to avoid future misuse.

4. Update the records of the credit bureau.

Your entire loan history from disbursement to closing is recorded in four different credit bureaus in the country. Make sure the lender updates this information within 30 days of closing the loan.

Check all four of your reports – CIBIL, CRIF, Experian and Equifax 30-45 days after credit closure. In case the records are not updated, you can send a request to the bureau and they will contact the lender to update the records. Please be sure to obtain confirmation from the bureau of the authorization.

5. Obtain an updated encumbrance certificate

An encumbrance certificate is a legal document that contains detailed records of all of your financial transactions related to mortgaged real estate. It can be obtained from the local sub-registrar’s office.

When you close a loan, this certificate should reflect full payment. Obtaining this document is proof that the property is free of any legal or monetary obligation and will come in handy whenever you want to sell property at any time in the future. This document is an important document in some parts of the country, while in some other parts it is not a critical document.

6. Release from pledge in case of a registered mortgage

Generally, a home loan is classified as a fair mortgage and no lien marking is done at the sub-registrar’s office. However, there are situations where the lender creates a registered mortgage for the property. This can happen when the lender is unsure of the borrower’s solvency or if there is something abnormal in a legal real estate transaction. Marking the collateral gives the lender the option to recover in the event of default.

If a registered mortgage / collateral is held on the property, you must ensure that it is verified at the sub-registrar’s office as soon as you repay the loan. If you do not charge the fee, you will have problems with ownership in the future. The charge was dropped, and the disclosure statement was filed at the sub-registrar’s office. To do this, an authorized employee of your financial institution will accompany you to the registrar’s office.

7. Tracking loan repayment

Get a repayment report from your lender and make sure all of your bulk payments are reflected in it as well. Please try to keep photocopies of the bank statements from which the repayment is being made. This can be useful in any dispute with a lender, government agency, or credit bureau.

8. Legal permission from your lawyer

It’s not a bad idea to get a police clearance certificate from a well-known lawyer. While not required, it may be useful in the future when selling a home.


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