Purchasing a home and applying for a home loan are the two most vital decisions of one’s life. You can plan to buy your dream home with a secured home loan, where you have to keep your house as collateral. So, in this case, you are giving the authority to the lender to auction your home to get the money back, if you become a defaulter.
However in that excitement, a lot of people do not take all the required actions and later suffer because of small things they didn’t complete after closing their home loans. In this article, I want to share few things every home owner should complete, when they are closing their loan.
While I am focusing totally on home loan closure in this article, but whatever I am going to share also applies when one closes a car loan, education loan, personal loan or any other kind of loan
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1) Get back all the original documents
Once you have made all your payments, the Bank or Housing Finance Company will give you all the original documents. You should make certain that all the documents you presented with the bank when taking the loan are returned. Typically it will be the Title Deeds and Mother Deed (if applicable).
Don’t just test out for document alone. Confirm that all the pages are there in good condition as well. I have seen cases where last page of sale deed went missing. In that instance you require to arrange for the misplaced page which is a tiresome process.
Ensure all the pages are intact in front of the bank official prior to signing on the acknowledgement of the bank.
Once you sign, you can’t undo it and banks typically won’t be receptive in this regard. It is typically a good process to get hold of the documents from bank by visiting them than request documents by courier.
2) Obtain No Objection Certificate
NOC or NC is a No Objection certificate which is a consent certificate from the bank or housing finance company. This affirms that the Bank does not have any more interest in the asset and it’s cleared by the bank after removing all hypothecation.
When you get this make certain the NOC unmistakably mentions the Property details (like address etc.,) , name of the borrower, home loan account number, date of loan starting and closure, amount borrowed and repaid (some banks don’t mention) .
Also a section should be plainly mentioned that the borrower has paid all the dues and the property is now debt-free. This will confirm that the home is completely yours now.
3. If Lien of Your Home Is with the Lender, Don’t Forget to Remove It from the Registrar Office
Lien here means “the right to hold possession of property which belongs to another person until he/she has cleared all the debt.”
When you buy a home with housing finance, the lender has the right to sell the property (home bought by you) if you’re unable to pay back the entire loan.
Nowadays, banks carefully check the background of the borrower in advance, so they don’t put a lien on the property. However, they keep the original documents (of property) in their custody.
But if the lenders find anything suspicious in any customer’s background, they might want to put a lien on his/ her property from registrar office.
So make sure you ask your lender about the lien on your property, and if it’s there, ask them about the process to remove it.
4. Is Your CIBIL Report Updated With “Closed” Entry?
A borrower’s creditworthiness is measured through his/ her CIBIL report and it records your every loan entry and payment actions. Lenders check your CIBIL report before giving any type of loan or credit card. So, if you have closed your home loan by making full payment, it’s crucial to check if your CIBIL report is updated with the “Closed” entry or not.
Although banks update it themselves, but many times they delay or even completely ignore it for several months and your CIBIL report isn’t updated on time which might decrease your credit score and mar your chances of getting any loan in future.
So, double check with the lender bank when you close your home loan account, that they update the CIBIL report at the earliest.
Whenever you’re closing your home loan (even if you’re opting for pre-closure), make sure you complete all the things mentioned above to be on the safer side.
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