Closure of a home loan

Terminating a home loan is as cumbersome as the process of applying for one. It is a document-heavy process. The only difference while closing a loan is that you have to recover all the original documents from the bank or the housing finance company (HFC).

Chances are you may just overlook the process as you may be celebrating the fact that your biggest liability is off your head. The thumb rule is that when you close the loan, you get back all the documents that you submit at the time of loan application to a bank/HFC. These include the loan papers, title insurance, statement, documents of owner's coverage, and other contact papers.

Over and above that you have to get a no-due certificate/ settlement statement. This is a written certificate from the lender, stating that you do not have any outstanding dues on your housing loan. This letter has assumed importance because of the formation of credit bureaus. In such long-tenure loans, which span over 120 to 180 months, a borrower often tends to overlook if any cheque has been delayed or bounced for some reason. Then a bank/HFC slaps some penalty, which costs the borrower a few thousand rupees.

Now, if the borrower does not make note of these additional charges and defaults on them, then the bank/HFC terms him/ her a defaulter. It doesn't matter even if you have repaid the principal and the interest component of the loan regularly, you will still be defined as a defaulter. Sometimes, a housing loan that probably started 10 to 15 years ago may mature now.

Since the registration of the property was not computerised then, the registrar may not send the required documents. Then an HFC/bank has to follow up with the registrar to get all the required documents for the termination of the loan. Another important document you have to possess once you pay off your home loan is the 'title of deeds'. This document traces the title of the property for a minimum period of 13 years. This document is essential if you want to sell your house/property.

Typically, as the first step, any prospective buyer looks at title deeds to confirm if the land is in your name and if you have the full right to sell it. You should collect all the documents within 10 days from the date of the repayment of the loan. This is best from the bank as well as the borrower's points of view. If the lender loses any of the crucial documents, then the borrower can get into a mess. It's a time-consuming exercise to arrange for the duplicate documents.


Source: Economic Times

Thanks and Regards,
Sanchari Sinha,
Intern at DENIP Consultants Pvt. Ltd.