Shashikant was quite happy and had a sense of pride as he was able to foreclose his home loan five years before its tenure. He was delighted not only because he was the owner of a debt-free house but also because he had saved on the interest amount. After a few years, he decides to sell his home but faces several hurdles! Turns out although Shashikant had prepaid the loan, he hadn’t completed the legal formalities, such as taking the “No objection Certificate” from the bank.
So, when you prepay the home loan, keep in mind the following tips to avoid any confusion and to be on the right side.
- Take a no objection certificate from the lender: This certificate is issued by the lender and certifies that you have paid the entire amount to the bank and there is no outstanding amount in your name. This is a legal document with bank’s stamp. Generally, the lender dispatches such certificate after the closure of the loan but in case it doesn’t don’t forget to collect it yourself.
- Retrieve original documents from the lender: Don’t forget to collect all your original documents back from your bank. At the time of disbursal of the home loan bank takes documents like sale deed, builder buyer agreement, possession letter etc from the borrower. It issues a list to avoid any kind of confusion at the time of closure. So, ensure you take back all the documents from your lender. Also, check whether all the pages are intact or not, if any page is missing it or not? Try and collect the documents in person from the branch rather than requesting them through courier or post.
- Obtain an encumbrance certificate from the registrar: It is the certificate that provides evidence that the property in question is free from any monetary and legal liabilities. The details of the property transactions are listed on encumbrance certificate. It works as evidence that the property can be sold and has a free title. So, you would require it at the time of selling the property.
Check Also: Tamil Nadu Encumbrance Certificate
- Get your CIBIL score updated: Banks send the data to credit information bureaus such as CIBIL (Credit Information Bureau of India Limited), which prepare credit report for individuals. After you repay the loan do check your credit report and ensure that it has been updated especially in case of prepayment. If it has not been updated then send a copy of the bank NOC to CIBIL and get your credit report updated.
- Collect other documents: Apart from the documents mentioned above, there are some more documents you need to collect, such as complete loan account statement, principal and interest certificates. You would need these documents at the time of filing your income tax return. Also, don’t forget to collect post-dated cheques (known as security cheques) from the lender, if you had issued them at the time of taking the loan.
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