BUYER BE AWARE - HOW TO CLOSE A HOME LOAN
People opting for a home loan usu ally spend a long time mulling over the best loan option, but the same intensity is often lacking when the time comes to close the loan. A home loan is a big and long financial commitment, and you should make sure that you are closing your loan properly and in a welldocumented manner.
Many home loan borrowers heave a sigh of relief once they pay off their last EMI. You may choose to either prepay your loan or complete your loan tenure, but always remember to follow the procedural guidelines.
“There are two ways in which you can close your home loan. Either you may decide to pay off your loan prematurely, or your loan may naturally reach the end of its tenure,“ Adhil Shetty, founder & CEO of BankBazaar.com, says.
If you are planning to close out your home loan prematurely, follow the stepwise process outlined below: Step 1: Write a letter to your bank or NBFC and request them to give you the outstanding amount as on a fixed date.
Step 2: The bank will then calculate your dues till that fixed date depending on your loan repayment cycle. The bank may charge you a prepayment penalty or prepayment fee if your home loan is on a fixed rate of interest.
Step 3: Give the banks a 15 to 20-day window for calculating your dues for closing your loan prematurely.
Step 4: Prepay the loan amount due on or before the stipulated date and confirm the repayment with your bank.“You can choose to prepay the amount either as cash or through a cheque. Mos people prefer paying off their dues through a cheque as it gives them a documented proof of loan prepayment,“ Shetty says.
Step 5: Take back post-dated cheques (PDCs) you may have issued to the bank after submission of your dues.
Step 6: The bank will issue a loan closure letter or NDC (No-due Certificate) stating that all dues have been repaid and there is no outstanding amount in your name.
Step 7: Take back your original documents from the bank after you obtain the NDC.
Step 8: Get your home loan lien re moved, if any.
If your loan has naturally reached the end of its tenure, here's what you need to do:
Step 1: When you reach the end of your loan tenure, you will need to write a letter to your bank informing them about the end of your loan.
St tep 2: The bank will double check your loan repayment and then issue you a NDC mentioning clearly that all the dues for your loan have been repaid.
Step 3: Make sure to double check the NDC document for any mismatch in name of the borrower, the property in question, the address and loan account t number.
Step 4: After the bank issues you NDC, request the bank to release all your property-related documents you have submitted with the bank. Usually, the bank gives you a List of Documents (LOD) that you submit at the time of taking a home loan. Crosscheck the list as you receive the documents submitted for any omissions.
Documents that you need to collect from your bank usually include: Original Sale Deed of your property Prior Title Deeds Power of Attorney, if applicable Builder-buyer agreement Property cost break-up, if given Possession letter Payment receipts Any cancelled cheques Any tripartite agreement, if applicable Encumbrance Certificate Land and Building Tax Receipts
Step 5: Check with your bank if they put a lien on your property. If yes, then you will need to approach the local registrar in your city and get the lien removed. You will need to submit the bank NDC with the local registrar to get the lien removed against your property.
Step 6: Request your bank to inform CIBIL about your successful loan closure. “The bank usually informs CIBIL once a month for all loan closures. The bank will inform you once they have shared the details with CIBIL and you can check your credit score to confirm.Any improvement in your credit score is a reflection that the bank has shared your successful loan closure details with the CIBIL,“ Shetty says.
Due diligence during a home loan closure is just as important as that when opting for one. Even after successful loan closure, make sure to have all details of the loan, including bank statements, NDC and prepayment records in place for future use