Meenakshi Taheem
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Closing your home loan is a significant milestone in your financial journey, marking the end of one of the most substantial debts you may ever undertake. However, simply making the last payment doesn't complete the process. There are several critical tasks you must ensure are completed to officially close out your loan and secure your property ownership. This blog will guide you through the essential home loan closure steps, ensuring you navigate this final phase of your home loan meticulously.
Complete these Important Tasks Before Closing Your Home Loan
- Obtain a No-Due Certificate
- Collect Original Documents
- Update CIBIL Score
- Update Property Records
- Credit Score
- Secure and Digitize Documents
- Revisit Your Will
- Conduct a Final Property Inspection
Task 1: Obtain a No-Due Certificate
The first and foremost step after paying off your home loan is to obtain a No-Due Certificate (NOC) or loan closure certificate from your lender. This document is crucial as it serves as proof that you have cleared all dues related to the loan, and that there is no outstanding amount. The NOC should mention your name, loan account number, property details, and a statement declaring that the loan has been fully repaid and the lien on the property (if any) is released.
Suggested read: NOC for Loan Closure
Task 2: Collect Original Documents
During the loan process, lenders hold onto the original property documents as collateral. Upon loan closure, ensure you collect all these original documents. Typically, these include the sale deed, mother deed, power of attorney, and any other documents submitted at the loan's inception. Verify the documents for any damages or misplacements. As per the recent directive mandate by the Reserve Bank of India (RBI) all Regulated Entities (REs) including banks have to return all original documents related to movable and immovable properties within 30 days following the complete repayment of the loan account. Failure to comply within this timeframe will result in a penalty based on the number of days delayed.
Task 3: Update CIBIL Score
A home loan closure should positively impact your credit score. However, this doesn’t happen automatically. Check your CIBIL score and report a few weeks after the closure to ensure the loan account status is updated to 'Closed'. Any discrepancies can affect your future creditworthiness, so rectify them with your lender and CIBIL immediately.
Task 4: Removal of Lien on Property
If there was a lien on your property, ensure it is removed post-loan repayment. A lien is a right given to the lender to hold or sell the property title in the case of a default. You should receive a lien termination document from the lender, which you must then submit to the registrar’s office to get the lien removed officially.
Task 5: Update Property Records
Post-loan closure, it's crucial to update the property records in government offices. This involves removing the bank's name from the property title if it was added as a collateral partner. In India, this process is known as mutation, and it's essential for the property owner to ensure that the land records reflect the current ownership status accurately.
Task 6: Secure and Digitize Documents
After retrieving your original documents, take the time to secure them in a safe place. Additionally, consider digitizing these documents to have backups in case of loss or damage to the originals. This digital backup can be stored securely in cloud storage or with other important digital files.
Suggested read: Documents Required for Home Construction Loan
Task 7: Revisit Your Will
If you have a will, revisiting it to reflect the full ownership of your property post-loan closure is wise. This ensures that your assets are correctly accounted for and there will be no legal ambiguities regarding your property’s ownership after your demise.
Task 8: Conduct a Final Property Inspection
Perform a thorough inspection of your property to ensure there are no pending legal or physical issues associated with it. Check for encumbrances, pending taxes, or any other liabilities that could pose a problem in the future.
Closing a home loan is more than just making the last payment. It involves a series of steps to ensure that all legal and financial obligations are met, securing your ownership free from any encumbrances. By following the outlined steps, you can ensure a smooth transition to becoming the outright owner of your property. Remember, this process protects your investment and solidifies your financial standing, making it a crucial phase in your home-owning journey.
FAQs About Important Tasks Before Closing Your Home Loan
The loan closing process involves completing all necessary paperwork, paying any remaining fees or charges, and fulfilling all the lender's requirements to finalize the loan. It concludes with the lender releasing the lien on any collateral and officially closing the loan account.
The proof of loan closure is typically a document or certificate provided by the lender, known as a "No Objection Certificate" (NOC) or loan closure letter, indicating that the borrower has fully repaid the loan and there are no outstanding dues.
To obtain a NOC after loan closure, the borrower usually needs to submit a request to the lender. The lender will then process the request and issue the NOC, confirming that the loan has been fully repaid and there are no outstanding claims on the collateral.
A closing statement for a home, often called a "Closing Disclosure," is a detailed document provided at the end of a real estate transaction. It outlines the final terms, costs, and payments made between the buyer, seller, and lender.
During the home loan closing process, you should review all the documents carefully, ensure the accuracy of all information, ask questions if anything is unclear, and make sure you have the necessary funds for closing costs. It's also important to confirm that you have received all necessary documents, including the closing statement and NOC.
A Bank NOC (No Objection Certificate) after loan closure is a document issued by the bank or financial institution. It serves as legal proof that the loan has been fully paid off, there is no outstanding balance, and the bank has no objection to the removal of its claim over the collateral used for the loan.
Published on 15th February 2024
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