[ecis2016.org] We list a few important things that borrowers should do when they close their loan, to prevent any chance of conflict and confusion in the future
Borrowers always feel a sense of relief, when they close their home loans, after months and years of paying the EMIs. At this stage, although one may feel carefree, there are several checks that you must perform, before you sit back and relax.
You are reading: 5 things to do when closing a home loan
1. Get hold of a no-dues certificate
As soon as you repay your home loan, ensure you get an NOC or an NDC. This is an acknowledgement of the fact that there are no further dues against your name and account. If a glitch comes up, this is the right time to verify it as well. Check the details, such as the name of the borrower, your account number from which the EMIs were being deducted, details of the property, date of closure, etc., and ensure that these are accurately documented. An NOC mentions that the borrower is henceforth the legal owner of the property and there is no role of the lender going forward.
2. Ask for your original documents
When you apply for a home loan for a property, the lending bank keeps all the original documents while you may have taken home photocopies of the same for your reference. Once you close your loan, the bank should return your papers to you. It is important to check whether you have received all the documents that were submitted and whether they are in good shape. These documents may include your sale deed, conveyance deed, builder-buyer agreement, power of attorney, payment receipts, possession letter, transfer permission, tripartite agreement, etc. Bring it to the notice of the lender, it if you feel that some document has been misplaced. In some cases, your lender may also have taken cheques, for security. Ask for these as well, since the bank will not need them anymore.
Read our article on sale deed vs agreement for sale, to know the differences between the two.
3. Confirm the termination of the lien
Banks always want to secure their position in case a borrower defaults. Hence, a borrower with a weak credit score may find a lien against his/her property. This empowers the lender to sell the particular property for recovery of dues, if necessary. The lien will also restrict the borrower from selling their property. Hence, it is important to get the lien terminated, so that it does not create any problems for you in the future. The local registrar will do this for you but their office may ask you for an NOC from the bank which is why an NOC should always be your first step.
4. Obtain a nil-encumbrance certificate
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Visit the sub-registrar’s office to procure the nil-encumbrance certificate or an EC. This certificate is proof of the fact that there is no further liability of debt and thus, devoid of legal or financial tangles. It is an important document, in case you wish to sell your property. You can show the encumbrance certificate (EC) to a prospective buyer, to avoid any chances of your property being viewed as a problematic one.
5. Ensure that your credit score is updated
Once your home loan is closed, you must check your credit score. If it has not been updated, you run the risk of not being considered for another loan, or for a lower interest rate. In case your bank has not been prompt, do not forget to remind them. Your credit score is an important indicator of your performance as a borrower and your repayment capacity.
[ecis2016.org] Why should you obtain a credit report before buying a house?
Can I pre close a home loan?
Yes you can foreclose a home loan, by paying a penalty as determined by the lender.
How long does it take to update the credit score after closing a home loan?
It may take up to a month’s time to update the credit score, after closing a home loan. Remind your bank from time to time to do so.
Is GST applicable on prepayment charges?
Yes, GST is applicable on not just prepayment but late payments, as well.
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