Home Loan Closure: Application, Process, Charges, Documents & More

Paying off the final instalment of a home loan and approaching its closure is undoubtedly a moment of relief. While the celebrations are a must, being familiar with the home loan closure process is equally important. This article outlines a checklist of the necessary documents to collect, the home loan closure charges (if any) and the step-by-step process for home loan closure.

Loan Close Application: Step-By-Step Guide

• Gather all Original Documents

  When the lender approves a home loan, one is required to provide their original documents as collateral. Thus, the initial step in the home loan closing process is to collect all the original documents. Ensure these documents are in good condition, with no missing or damaged pages. The list of original home loan closure documents to be collected after closing a home loan includes:

  • Power of Attorney
  • Sale Deed
  • Loan Agreement papers
  • Title Deed
  • Possession letter
  • Payment receipts (if applicable)

• Get a No Dues Certificate (NDC) from the Lender

  After fully repaying the home loan amount, get a No Dues Certificate (NDC) from the lender. This document is also referred to as the No-Objection Certificate (NOC). The NDC includes essential details such as the property address, the names of the applicants, the loan amount, the loan account number, and the home loan closure dates. It serves as legal proof that one has cleared the loan amount and any penalties, if applicable. Ensure that the NDC is appropriately signed and bears the official stamp of the lender.

• Remove the Lien on the Property

  Banks use liens on properties to protect their ability to recover the loan amount in case of EMI payment defaults. A lien grants the bank rights over a person's property until the clearance of the debt. One must have the lien removed after paying off the loan amount and submitting the application for closing a loan account. This step ensures that one has complete ownership of the property. To remove the lien, one must visit the registrar's office along with a representative from the lender.

• Get the Latest Non-Encumbrance Certificate

  After fully repaying the loan balance and removing the lien from one's property, the person must contact the Registrar's Office to get a fresh Non-Encumbrance Certificate. This legal document provides comprehensive details of all financial transactions related to the property.

• Return the Security Checks

  Banks often require individuals to submit post-dated checks when applying for a housing loan to cover the monthly EMIs. Once the person has successfully paid off the loan, collect the post-dated checks from the bank, provided any EMIs were not missed.

• Update the Personal Credit Score

  If one intends to apply for a personal loan or a credit card after fully repaying the home loan, one must ensure that the credit score accurately reflects this. Sometimes, even after clearing the home loan, a person's credit score may still show the status as dues remaining. To avoid complications, one must update the credit report after completely paying off the home loan. Approximately 30-45 days after making the repayment, check the credit report to verify if the home loan repayment status is correctly indicated as fully paid.

Summary of Application for Loan Closure

If an individual has made the final payment for their home loan and cleared all outstanding debts, the following steps of the home loan closure procedure should be followed to close the account:

• Write a letter to the bank requesting the return of the original submitted by the person when applying for the loan.
• If there is a need for any other documents, like invoice copies, include them in the letter.
• Typically, the bank will respond to the inquiry within 7 working days.
• The lender will return the original documents and provide a loan closure letter confirming no remaining balances.
• One will get a No Objection Certificate (NOC) from the bank, stating that the person no longer has any claim on the property.
• If the bank had placed a lien on the property, one must visit the Registrar's Office with the NOC and a bank representative to remove the lien.
• If there is no lien on one's property, the bank will promptly return the title documents to the person.

To Conclude

Earlier, banks discouraged early repayments on housing loansby preventing people from paying less interest than completing the entire loan tenure. This led to the imposition of home loan pre-closure charges. The Reserve Bank of India now prohibits housing loan pre-closure charges for people with floating interest rateson term loans. As a result, more and more people are owning their ideal homes with the help of pre-closure home loans. While home loans help people realise their dream of owning a house, it is the people who turn houses into homes. Piramal Mahalaxmi is one such creation that offers an abode oozing the luxuries of life.