Important Things to do While Closing Your Home Loan to Avoid Complications

Thanks to home loans, individuals can realise their dreams of becoming homeowners. That dream becomes a reality when the borrower repays the complete home loan.

After paying off the final dues on your home, you become a proud homeowner. It is an emotional and exciting moment. It is also a time to celebrate.

After years of paying the EMIs, loan takers are rightfully relieved when their home loans are closed. Borrowers are likely to become carefree and complacent.

However, before the festivities can begin, you have to make sure that the process to close your home loan is complete. If you do not tie the loose ends now, you may face complications in the future.

No Dues Certificate (NDC)

After you completely repay your home loan, make sure that you collect your No Dues Certificate (NDC) or No Objection Certificate (NOC). This document is irrefutable proof that there is no outstanding amount in the loan account against your name.

A NOC or NDC certifies that there are no dues and that the loan has been repaid in full. When obtaining your NDC, ensure that all the pertinent details have been mentioned correctly. This includes the date on which the loan was closed, the property details against which the loan was issued, the account number of the loan, the borrower’s name, etc.

When obtaining the NOC, also make sure the spellings of all the relevant details are correct. The document should also state clearly that the lender does not have any right over your property and that you are the sole owner.

The original documents

When applying for a home loan, borrowers are required to submit the original documents of the property to the lender. After you repay the loan completely, make sure that you collect all the original documents back from the lender.

At the time of application, lenders provide a List of Documents for home loan (LOD) to the borrower to help them organise their original documents. When procuring the original documents back after repaying the whole loan, ensure that you cross-check all of them with the LOD.

A LOD typically comprise of a combination of the following documents

• Security cheques
• Power of Attorney
• Loan Agreement
• Title Deed
• Sale Deed
• Possession letter
• Income proof
• Bank account statements
• Transfer permission
• Payment receipts
• Builder-buyer agreement
• Loan agreement

Make sure that the pages are not torn or misplaced and that they are all in good condition.

Lien termination

To avoid substantial losses if a borrower defaults, lenders always try to secure their position. A borrower may incur a lien against the property if he or she has a weak credit score. A lien allows a lender, if necessary, to recover dues by selling the property.

Under lien, a borrower cannot sell the property. To ensure that you do not face any hassles in the future, make sure that you have the lien terminated after closing a home loan.

You can terminate a lien at a local registrar. In return, they will ask you to furnish the NOC as proof.

No or nil-encumbrance certificate

After you completely repay your home loan, you can collect the nil-encumbrance certificate or the EC from the sub-registrar’s office. This certificate proves that there are no further financial or legal tangles and that there is no liability of debt.

The EC is a legal document. It details all the financial transaction records of the property that has been mortgaged for the loan. When your home loan is completely paid off, the same is reflected in this certificate.

If you ever want to sell your property, the EC is a vital document that will come in handy.

Credit score

After you completely repay your home loan, remember to check your credit score. If your credit score is not updated to reflect your status as debt-free, your chances of getting a loan in the future may diminish.

Even if you fulfil the home loan eligibility, a credit score that does not reflect a previous loan fully repaid may attract adverse or negative terms and conditions. Your credit score is an indispensable metric to gauge your repayment capacity and your performance as a borrower.

It is the responsibility of the lending institution to update CIBIL that you have successfully repaid the home loan. If your lender is dragging its feet on getting your credit score updated, do not hesitate to follow up with them.

Successful repayment of your home loan is a legitimate cause for celebration. Don’t forget to dot the i’s and cross the t’s before you lose yourself in all the mirth and merriment, lest they come back to haunt you in the future.

Check out our online home loan EMI calculator to help you determine the ideal loan tenure. To apply for a home loan click the “Apply now” button on this page.

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