Becoming the debt-free owner of your house is a financial achievement. It gives you relief and freedom from paying EMI month on month, and you have the satisfaction that your home is now entirely your own. However, you cannot afford to ignore certain due diligence when closing your home loan. The task may seem a little wearisome, but it will keep you safe from all legal disputes related to the loan after you settle your debt.
Here are five things you must do when closing your home loan.
Collect Original Property Documents From Lender
A home loan is a secured loan, so you mortgage your property when you borrow money from banks or other financial institutions. You must submit all your original property documents to the financial institutions until you repay your loan fully. When you close your home loan, ensure you collect all the original documents submitted to the lender at the time of disbursing of the loan. These documents would typically include the sale deed, builder-buyer agreement, allotment letter, possession letter, sale agreement and any other documents submitted with the lender. Make sure the documents are intact and returned to you in good condition. It would not be amiss to do a page-by-page check.
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Get No-Dues Certificate
The No-Dues Certificate is one of the most important documents. You must collect it from the lender immediately after the repayment of your home loan fully. This document states that you have paid all your outstanding dues, and the lender does not have any right to the property mortgaged with them at the time of loan disbursement. Check this document carefully and see whether the property details, your name, etc., are correctly mentioned. This document will ensure there is no legal dispute with the lender related to dues in future.
Soumee Bhatt, General Counsel, Bankbazaar.com, explains, “The ‘No-dues Certificate’ will keep your legal troubles away. It ensures that you have no disputes in future with the lender pertaining to your loan, which you have already paid in full. You can enjoy your property without worrying about permissions from the financial institution.”
Get Lien On The Property Removed
Lenders add a lien to the property when you borrow money to buy a house. It protects the lender’s rights and prevents the borrower from selling the property until the mortgage is paid fully. Make sure to get the lien removed to enjoy an absolute right on your property. After the lien is removed, you can sell the property hassle-free.
Obtain A Non-Encumbrance Certificate
The Encumbrance Certificate contains records of all financial transactions related to your property. The Non-Encumbrance Certificate, on the other hand, is a legal document that declares there are no registered encumbrances against a property. You need to ensure that once you have settled your dues with the lender, this repayment should reflect in the Encumbrance Certificate, so there are no issues later, and you should be able to get a Non- Encumbrance Certificate basis this. This ensures the property is free of all monetary and legal liabilities.
Check If Your Credit Records Are Updated
Whenever you take any type of loan, the same gets reflected in your credit records. It impacts your fresh borrowing. It is advisable to get your credit records updated. It will help your credit score to improve post the repayment of your loan. It may take some time to update your records, but it is worth the effort you will put in to ensure your records do not show the loan you have already paid. You can check your credit report regularly to make sure your records are updated.
Adhil Shetty, CEO, Bankbazaar.com, says, “After you have settled your home loan, it makes sense to update your credit records. Keep track of your credit report and get the paid loan removed from your records. This step will ensure your financial borrowings are updated as per the current situation and open opportunities for you to borrow afresh when in need.”
Settling a home loan is a matter of pride for many borrowers but ignoring the above-mentioned due diligence steps may result in disputes if the lender makes mistakes in its record. The property records may vary from state to state in India, which is why you need to have a list of documents you have submitted with the lender; the same can be useful when you apply to get them back after the loan is repaid in full. Don’t ignore the requisite documents and be proactive to clear all your doubts about your mortgaged property at the time of repayment.
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