Six Must Do Things on Home Loan Prepayment & Closure Procedure
Home loan foreclosure involves lot of documentation and a lengthy procedure. Most of the times buyers are unaware of the processes to be followed and documents to be obtained from the bank which consequently impacts the future prospects of the property. At times, buyers get all the property-related papers but forget to get the lien removed which is mandatory to sell the property.
MakaaniQ tells you the drill that you should follow after pre-paying your home loan-
Get the lien on the property removed
A lien is a legal claim against a mortgaged property that must be paid when the property is sold. The mortgage lien gives the lender the best refuge in the event of the borrower's failure to repay the debt.
Getting the lien on the property removed by the registrar's office is an important step after closing the home loan. Remember that you cannot sell your property till the lien on it is removed (on the request of the lender). It's advisable to check with the lender if a lien has been put on your property (every lender doesn't necessarily do so).
Obtain a no-objection certificate
It is very important to get an NoC from the lender. The NoC should clearly specify that all the dues have been paid and the lender has no right on the property. It must also identify the name and the loan account number of the borrower.
Get the complete set of original property papers
Make sure that all the property documents you had submitted to the lender are returned. Ensure that all these papers are in a good shape. For instance, the pages of the sale deed or other documents sometimes go missing; that creates legal and technical issues while applying for a second mortgage.
Try to visit the lender to obtain the original property documents rather than requesting for documents by courier. Thoroughly check every page of the original document received before you sign the acknowledgement that you have received the property papers back.
Get CIBIL data updated
Banks and financial institutions sometimes forget to inform the Credit Information Bureau (India) Limited (CIBIL) when a home loan is foreclosed/closed. This is the reason why you find that many loans do not reflect in the credit report.
Credit score, being an important metric of your creditworthiness, needs to be reported to CIBIL. It takes 30 days to complete the CIBIL update. You must keep in touch with the lender. Once the information gets updated on the CIBIL website, you must generate the credit report to make sure it reflects in the score, for future reference.
Get new encumbrance certificate from the registrar
Encumbrance certificate is a document that lists all the financial transactions performed on the property. Once the lien is removed and the mortgage on the property is cancelled, it should reflect on the encumbrance certificate. Therefore, if the encumbrance certificate does not mention the closure of the loan, approach your lender or the registrar's office for further procedure.
Say goodbye to the bank on a positive note
You must ensure that you close your home loan on a friendly note. You never know when you might have to approach the lender again for a second mortgage or assistance in selling your property.
Also Watch: Six Things To Do When Foreclosing The Home Loan