A Guide To Home Loan Closure Formalities

By BankBazaar | December 17, 2015

Home Loan Closure

Closing a Home Loan is one of the biggest highs for a Home Loan borrower. After all, there will be no more monthly EMIs and no more worries about increasing interest rates. What’s more, you can use the extra money for whatever you want. Closing a Home Loan brings a great sense of relief that you finally, truly own your real-estate property.

In the quest to close Home Loans, many borrowers fail to fulfil the loan closure formalities which return to haunt them at a later stage. While the euphoric high of paying off your last EMI towards your Home Loan is understandable, you must be vigilant when closing your loan either at the end of the tenure or prematurely.

Here’s everything you should know about Home Loan closure formalities.

Closing a loan at the end of its tenure

So you have been able to ride the ups and downs of your long loan tenure and have reached the fag end of your loan. Once you pay off your last Home Loan EMI, send a letter to your loan provider informing them about the end of the loan tenure and requesting them to return your property documents. Usually, the finance institution will respond within a week and also issue a closure letter for your loan.

Closing a Home Loan by prepayment

If you want to prepay your Home Loan and have the funds to prepay, the first thing you must do is check your pending loan amount with the bank. Give the bank an exact date and request them to calculate your outstanding dues till that date. Depending on your repayment cycle, inform your bank either before the end of the cycle or at least 15-20 days in advance for them to process the calculation of the outstanding amount. Once you prepay the loan, take back all the post-dated cheques you may have issued.

Important things to remember for Home Loan closure

Irrespective of whether you are closing your loan at the end of the tenure or prematurely, keep these points in mind to ensure a successful loan closure.

  • Get an NOC from the Bank or HFC: Once all the payments towards your loan are done successfully, request the bank to issue a no objection certificate (NOC). Do not fail to check if the NOC has your name, property address and loan account number mentioned clearly. The NOC should also mention that all dues have been paid and the bank or the HFC has no claim on your property anymore.
  • Take back the original documents after due diligence: You hand over a certain number of documents to the bank while taking a loan. It is important to take back all original documents once the loan is cleared. Banks generally give a list of documents they have taken from you at the time of loan disbursal. Keep that list handy to counter check if the bank has returned all the submitted documents. Also, make sure that no part of any of your documents is missing. Double check all relevant documentation before you sign an acknowledgment that you have received all original documents from the bank.
  • Get the lien removed, if any: Check with your bank if they had put a lien on your property for the loan. If they did, you will need to approach the registrar office with the NOC from the bank and get the lien removed from your property – just as in the case of a Car  Loan.
  • Request the bank to inform CIBIL on successful loan closure: Request your bank in a written format to inform CIBIL about your successful loan closure. This will reflect an improvement in your CIBIL score. You can check your CIBIL score once the bank informs them to make sure that your Credit Score has changed and improved.

Closing a Home Loan is just as significant as opting for one. Do not get overwhelmed by the occasion when paying your last EMI and make sure you get all relevant documents back from the lending bank or HFC.

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