5 Must Do Things on Home Loan Prepayment and Pre-Closure Procedure

Many Indians take a home loan for purchasing a home. There are several renowned banks, NBFCs and cooperatives in the country are a preferred choice for several buyers. Moreover, as the home loan interest rate has seen considerable fluctuations in the past few years, taking a loan from the bank can help you save a significant amount of money too.

Several people who have taken home loan often think about prepaying the loan in parts or fully. While pre-paying a home loan can be a financially sound decision, there are many important things you should take care of to properly get the pre-closure done.

Here are the five most important things know and understand before prepaying a home loan.

1. Get the NOC

No Object Certificate (NOC) is a clearance certificate you receive from the bank when you have fully repaid a loan. This certificate states the property is now debt-free and the bank no longer has any right, stake or interest on your property. When you do get the NOC, ensure it has the correct details of your property, your name, loan amount, repayment date, etc. If in doubt, seek professional help to avoid future complications.

2. Obtain All Your Original Documents

When taking a home loan, most banks and NBFCs require the submission of original documents, like Mother Deed and Title Deeds. When the loan is repaid, banks are required to return these original documents to you, the borrower. When you receive these documents after prepayment of your home loan in full, make sure that they are in good condition before you sign the acknowledgment letter from the bank. Take note of any damage, before signing off.

3. Remove Lien on the Property

In several cases when the bank isn’t able to confirm the credibility of the borrower, a lien is created when the loan is granted. A lien is the registration of the transaction between you and the bank at the Registrar’s office. A lien takes away the freedom to sell your property without the bank’s consent. So, when you prepay the home loan – it is of immense importance to make sure the lien is terminated.

4. Proof of Repayment

It is recommended that you should keep a copy of the demand drafts or cheques you issued to the bank for prepaying the loan. While the bank will provide NOC and acknowledgment letter, the photocopies of scanned copies can help in preventing any discrepancies in the future. Of course, your bank statements will also act as a cover, but having these copies will save you the effort of going through monthly details.

5. Get the CIBIL Score Updated

Banks often fail to update CIBIL about you pre-closing the home loan. Keep track and ensure your bank updates CIBIL about the pre-closure which can take up to 20-30 days. Stay in touch with the bank throughout the process so that it gets done on time. And when it is finally done, don’t forget to get your CIBIL report for a confirmation of the step. Though financial institutions take care of these steps, regular follow up and checking to ensure is essential at your end.

Remember home loan rate will depend upon the amount of loan that you want and your financial standing i.e. your credit score. Use a housing loan interest rate calculator to get a fair idea of your eligibility and loan available to you. Prepaying a home loan can be a financially beneficial decision along with the joyful feeling it brings of owning a loan-free property. However, if you have taken a home loan and are planning to repay it in parts or whole, the above-mentioned things can ensure the pre-closure is completed in the right manner.

Read Also: A Step-by-Step Financial Guide for Building a Dream Home

Author Since: Jan 17, 2019

Anoop Bansal, a professional Chartered Accountant based in the National Capital - Delhi. I have worked for the top-notch Indian and International banking firms for the past 10 years. Currently, I work at emi-calculator.loan blog and a financial consultant for different SMEs in India. Follow me on Facebook, Twitter and Linkedin for more information.

  1. Hey, Thank you for taking the time to write this. Keep posting same type of informative content across the website

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