7 Things You Must Do Upon Your Home Loan Pre-Closure

Borrowing loan for buying home is the biggest financial burden for new age homebuyers. The total cost of financing the home loan is usually the double the principal borrowed. However, Reserve Bank of India has waived the prepayment charges which is a good news for those buyers who wish to clear the debt before the tenure. So, if you too are planning to unburden yourself, here are seven things you must do when you pre-pay your home loan:

Get original documents released from bank

After you have cleared the debt to the bank, they will give you all your documents in original, including the sale deed and the mother deed. Ensure that all the documents given to the bank are returned., are in proper order and no paper is missing. After you have signed the acknowledgement receipt, the bank will not entertain you if any paper is missing. 

Also Read: What Do Banks Owe You When Disbursing A Home Loan?

Get NOC

An NOC or a no-objection certificate is a clearance given by the bank or the lender stating that it does not any interest in the property. Ensure that the document clearly mentions your name and address, home loan account number, date of loan closure, etc. Get a clause inserted that the property is debt-free.

Update the CIBIL score

Often the bank or lender does not show any interest in updating your CIBIL (Credit Information Bureau India Ltd) score when the loan is repaid. As a CIBIL score is a proof of your credit worthiness, press upon the bank staff to inform the CIBIL when you pre-pay the loan. 

Get lien removed on property from registrar office

If the credibility of the borrower is under a cloud, banks often create a lien. A lien is a transaction registered in the registrar office which prevents the loan borrower from selling the property. A bank official will accompany you to the registrar office. It takes between a week to 10 days for changes to be reflected in the records.

Also read: How To Avoid Mortgage Mishap

Procure legal clearance certificate from lawyer

Although an optional attachment, there is no harm in taking a legal clearance certificate from a reputed lawyer. This would help speed up the process if you plan to sell the house.

A new encumbrance certificate for you

This is a very important step as it will give a finality to the pre-payment process. After the loan has been pre-paid and the lien, if any, removed from your property, apply for a fresh encumbrance certificate in the Registrar Office. It is a document outlining all the financial transactions performed on the property, including the pre-payment on the loan. 

Have a detailed track of loan repayments

Now, that you have pre-closed your home loan, keep a track of bank statements which reflect your loan EMI. Keep the photocopy of any pre-payment done in a lump sum amount. If any issue crops up with the bank or with any other government department, you should have an evidence to prove that the loan was paid and that you're the absolute owner of the property. 

Collect post-dated cheques  

When the bank disbursed your loan, it must have taken security cheques in case you defaulted on your equated monthly installments or EMI payments. Make sure you take these cheques back, once the loan is closed and destroy them to prevent misuse.

What is the procedure to close the loan at the end of the tenure:

If the last EMI and all outstanding dues have been paid, then you need to write a letter to the bank requesting a return of the original documents. If you need any other documents such as invoice copies etc. include this in your letter. Generally, the bank responds to such letters within seven working days.
The bank will return your original documents and issue a closure letter stating that there is no outstanding amount. It will also give an NOC stating that it no longer has an interest in the property.

If the mortgage has been registered, then the no- objection certificate needs to be taken to the Registrar's Office to get the lien removed. The borrower and a representative of the bank need to be present for this. However, if the mortgage is not registered, the bank will simply return the title deeds.

Read More: Six Must Do Things on Home Loan Prepayment and Closure Procedure

Also watch: How to close your home loan