A Home is a Biggest Asset, Where as Home Loan is Biggest Liability. According to one of research agency, Closure of Home Loan is considered to be one of the 3 Biggest Happiness in Human Life i.e. 1st Job, 1st Love and Home Loan Closure. This happiness can convert into sadness, if we don’t follow some important procedures or steps while closing the Home Loan. As we know while taking Home Loan, we mortgage our property with lender and at the same all the original documents are with lender..It is important that at the time of closing Home Loan, we should take care of following points
1. No Objection Certificate (NOC): It is very important to take NOC from the Lender..NOC should clearly mention the address of Property against which loan was taken, Name of Borrower & Loan Account No of Borrower. Secondly, it should state that all the dues are paid by the Borrower and Lender does not have any rights or claims on the Property.
2. Original Documents Submitted to Lender: At the time of availing Loan, we submit whole lot of documents with Lender, It is critical to recover all the original documents from Lender. At the time of availing loan lender issue the List of documents submitted by the borrower…This list comes handy at the time of closure..You should recover each and every original document submitted with Lender.
3. All Document Pages are Intact and not misplaced: All lenders keep the original documents of Borrowers normally at centralized locations and this work is normally outsourced to the 3rd party agencies e.g. Bank A maintain Centralized repository at Mumbai. Now suppose, i took a loan from Bank A then my documents are passed through many hands like from Branch to Legal Department, Legal Department will forward to Regional Head Office with comments and then they will forward to Mumbai office of Bank A. Mumbai office will then hand it over to agency and agency will give documents to operations team to keep them in Locker…While closing loan, reverse process is followed…Recently, one of my colleague closed her Loan and took documents from HFC. Over weekend when she was casually checking the documents, she observed that Last Page of the Original Sale Deed was missing…Legally its a mess for her to resolve this issue becoz process is very tedious, if any document or page goes missing…After Loan Closure, Never ever request the documents through courier from Bank / HFC…Always visit the Branch personally to collect the documents and Most critical part is to check each and every page of the documents received in front of Bank official before signing the acknowledgement that you received the documents back. After you sign the acknowledgement, there is no liability of Bank or HFC if any document or page is missing.
4. CIBIL Database Update: Whenever u take loan, Banks or HFC’s are very pro-active to inform CIBIL regarding the same but while home loan closure this pro-activeness is missing specially if its pre-closure. While closing the loan, u can give written request to Bank or HFC to inform CIBIL regarding closure of ur Loan account and all dues are paid..It is very important else your CIBIL score will remain low…Ask Bank or HFC, how many days they will take to update the CIBIL database..Normally this process take 30 days from Date of Loan Closure…Request Bank or HFC to inform u when they update the CIBIL datebase or you can follow up with them. Post database is updated by Bank or HFC, You can request for CIBIL report either from their website or manual request through courier and you can cross verify whether your Bank or HFC has updated your CIBIL record or not..If it is not updated then you can write to CIBIL and send them NOC issued by Bank or HFC. You can directly request CIBIL to update your records and this facility is available online also..CIBIL normally revert within 15-20 days with status update on ur request as they check with bank or HFC for confirmation.
5. Remove Lien from Registrar Office: Last but not the least is to get Lien removed on property from Registrar office. Lien is a legal claim against an asset which is used to secure a loan and which must be paid when the property is sold. In layman terms, many times if Bank or HFC is doubtful of Borrower then they register the mortgage document in Registrar Office and put a Lien on the Property similar to Lien in case of Auto Loan. In case of Auto Loan, on the RC of vehicle it is mentioned that vehicle is mortgaged or HP. What it means is that till the time Lien is removed from your property on request of lender, you cannot sell your property. You can check with your Bank or HFC whether they have put Lien on your property. If yes, then you should ensure that it is removed post Loan Closure otherwise may be after few years if u plan to sell your property then again u need to visit your lender to get it removed.
It is very important to follow above 5 points so that after closing your Home Loan, your property is truly yours.
Copyright © 2011-2012 Nitin Bhatia. All Rights Reserved.
Thanks nitin! this is a real good piece of info & handy to know. Can you also share your thought on what are the options available for one just incase someone fails to pay back home loans on a property where one has invested 20% & on 80% bank loan…
Hi Sukurath,
Unfortunately my friend borrower does not have any option legally, in case of deafult..You can only request your lender to re-structure your loan by reducing EMI and increasing tenure which is convenient for you to pay..Its my responsibility to inform u that in case of regular default, Lender might put your property for auction to recover its due amount..After recovering due amount from total auction proceed, rest amount will be paid to borrower..Hope i answered ur query
Dear Sir,
With reference of above i would like to have guidance and necessary suggestion for the Home Loan Pre Closure Charges which is levy to me as i would like to pre close my Home Loan.
I took Home Loan as well as Home Top Up loan, Where as the cheque of home loan was issued in the name of Builder and cheque of Home top up loan was issued in our personal name. Now according to Circular from RBI and NHB the levy of Pre Closure charges on Home Loan has been removed.
Now my current bank is agree to waive Home Loan Pre Closure charges but they says they will continue to charge 2% Pre Closure charges on Home Top Up loan, while that comes in Home loan category and every norms they applies of Home Loan.
Kindly suggest me the best possible solution weather i should go with the BANKING OMBUDSMAN and filed the complaint on same??
Awaiting your quick and positive reply.
Thanking you,
Best Regards,
Kamlesh
+919820988111
Dear Kamlesh,
Unfortunately Home Loan Top Up does not qualify as Home Loan becoz this loan is granted for purpose of Home Improvement or Home Extension. In layman terms top up loan is as good as Personal Loan.
You need to pay Pre-Closure charges for your Home Loan top up as RBI or NHB does not govern these kind of loans. Different institutions have different rules for Pre-Closure charges of Home Loan top up. Request you to visit your bank’s site to cross check Pre-Closure charges.
Hope i answered your query.
Hi Nitin,
Thankyou for putting up such a informative article.
Here’s my query/dilema
I am about to pay off my home loan and have noted all the points mentioned by you. However my problem here is that there is a dispute going on with the builder over the payment of VAT. I have already payed 1 % VAT on teh agreement value to the builder and now the builder is demanding a 5 % (based on rule change in Maharashtra). Based on this demand he has held back the society handover and whenever any indivdual needs any kind of NOC etc form the builder he demands random sums.
If I preclose my Home loan, will I need any kind of documentation / confirmation from the Builder ?
Please help me out with the answer if you can, thanks again for the article.
Regards
Sarvesh
Hi,
For pre-closure of Home Loan, might ask Builder NOC. Secondly VAT & ST needs to be paid by buyer therefore as per rules of your state, u need to pay VAT as per existing rate.
Tks
gud piece of information.. thank you for bringing the awareness :)
Dear Nitin,
Found this page very much useful for getting the information. thanks very much.
My query below:
I have decided to sell my current flat which is still having a home loan. Purchaser of my flat want immediate registration and my society is not giving NOC unless they get NOC from my bank that loan is cleared. However, my purchaser is thinking about a bank to bank transfer of the loan. So, I can’t completely repay my bank loan before registration. Without my society NOC, registration is also not possible. Can you please advice a solution.
Society has nothing to do with your bank loan. If you have cleared all the dues of society then society cannot refuse NOC to you. You may write letter to your society president and secretary mentioning that you have cleared all the dues of society and NOC should be issued to you on urgent basis. Take acknowledgement of this letter from society office. If still they don’t issue then you can complain to Registrar of societies in your area of property jurisdiction.
Your purchaser will not get home loan without society NOC. Registration can be done without NOC but for your own benefit you should get NOC from society otherwise it might cause problem to you after sale.
Hi Nitin
Axis Bank sanctioned total Home Loan amount Rs 25,49,175.00 ( 80% of total Home cost). Out of this, Bank is already disbursed Rs 14,48,451.00 and pending amount is Rs .1100724. Axis Bank Started disbursement once I paid my 10% part of total home cost. Could you please let me know when Axis may ask me to pay remaining my 10% part to continue remaining disbursement or Axis will keep disbursement till their sanction limit and after that I have to pay my part. Please clarify it.
As a thumb rule, you need to pay your contribution 1st before bank pays. But seems your property is under construction therefore in all probability before full & final disbursement, Axis bank will ask you to pay your 10% contribution
Hi,
My father was bank Manager in Allahabad bank who expired on 30 Dec 2012.
He has taken housing loan from Allahabad bank. When I visited branch to get sale deeds and NOC, Senior Manager asked me to submit request in writing with signature of all family members. I did the same and submitted letter by post, now he is asking all family members to visit branch to get sale deeds and NOC, which is not possible as some members are in different state for study and job.
He is actually harassing and misusing his power because I made his complaint for delay to his seniors.
Is this legal? Can he ask all members to come for sale deeds and NOC. Can’t I get my sale deeds and NOC without visiting branch? Because I already visited 8 times and Senior manager is literally harassing.
I also asked him to pay compensation for delay. There is compensation policy if bank fails to return all property documents with in 15 days on closure of loan account.
This loan has been closed more than one month back.
Also this loan was insured under AllBank Ghiha mangal Scheme which is a tie up between Allahabad Bank and LIC. LIC must pay all outstanding loan balance and bank must monitor. But LIC paid only some amount and remaining amount was debited from PF/Gratuity of my father. When I asked bank for this wrong done, they are simply saying “its not bank’s responsibility”.
Please advise.
Regards
Varun Anand
Bank manager is right…All the legal heirs of your father should be present personally to collect property docs to avoid any legal hassle.
In some cases, Loan insurance is applicable only for liabilities post recovering dues from assets of deceased i.e. your father. Pls check, your insurance document…It is not responsibility of bank but of insurance company.
dear sir,
i have taken home loan from gruh finance.
now i want balance transfer from icici bank.
icici bank will not mortgage for home loan
how can i clear mortgage after closing the loan with gruh finance?
Property is mortgaged through MOD (Memorandum of Deposit of title deeds). Once you clear your loan and get NOC from Bank/HFC then MOD stands Null & Void. It also clear mortgage on property.
K. Ramalingam is the chief financial planner at Holistic Investment has copied your article on NDTV.. Shame.
Thanks for highlighting. I am looking into it. I have written to NDTV regarding same. Will update my readers shortly. Tks again.
Dear Sir,
I have taken housing loan for my apartment from IOB and closed the loan. Now the Original Documents are not traceable at the Bank. You are requested to kindly advice the further course of action
Immediately register Police FIR against bank regarding same. Submit copy of Police FIR with bank. Bank is responsible to put a public notice in 2 newspaper mentioning that it has lost the property documents of your property.
Then u obtain indemnity bond from bank and then bank will obtain certified copies of your documents from registrar office (You need not to do anything). At the same time, you can take affidavit from bank and submit to registrar of co-operative societies that your original documents are lost by bank to avoid any fraud. You can also request for duplicate share certificate from society by submitting Police FIR.
Also you can file complaint in consumer forum and claim compensation from bank for deficiency of service. You can demand compensation equivalent to double the value of your property. In such cases decision is always in favor of customer.
Besides compensation, bank is also liable to pay 100 Rs per day if there is delay in providing documents beyond 15 days from date of loan closure. This is over and above compensation for deficiency in service.
Last but not least all the cost will be borne by the bank.
Hello Nitin!
Nice to read your posts giving very prudent insight of real market. I too got benefited from them. This time need some advice from you.
I took home loan (ready to move in property) in June 2013 of 25 lacs (15yr tenure) to invest and save ITax (of 30% slab), suddenly due to some personal exigencies relocated to job profile with low salary and as a result the balance from my salary after expenses cant pay whole EMI about >7k .
Presently, I have fund ~ 15 lacs , the options checking are
1) Part payment of 15 lacs or less,- its total saving available
2) Extend loan duration to 20 years to reduce EMI, – whether re-documentation will be reqd. or only application will do
3) mix of both- i.e. extend to 20 yrs and decrease EMI by part paying loan
4) Sell off (as no much appreciation xpected in coming yrs against yrly interest accrued by loan for beginning 5 years)
The home was bought solely as investment instrument- no dwelling planned. The current market will require 7 yrs for it to give some profitable yield.
You have not mentioned whether you have put this property on rent or not as it is ready to move in. I am assuming that its on Rent.
In this case you can make prepayment to the extent that Rent Received + 7K (your contribution) should be equal to your monthly EMI. You may inform bank that you can pay EMI = Rent + Your Contribution then how much prepayment you need to make so that your EMI reduce to this level after pre-payment. I am sure it will be much less then 15 lacs.
I will not suggest you to sell or increase loan duration (Will increase your interest outflow).
Great Article. Thanks Nitin !
I have a question. I am living outside India since 5 year now, and would like to close my home-loan (with standard chartered bank, at Hyderabad, and home where my parents are living).
Do you know if my presence in person is needed at any stage (payment for pre-closure or getting NOC or getting back the original documents) ?
Can my father do it on behalf of me ? (provided, I give him written authority ?)
(I am posting as a guest, but will look back to check your answer)
Your presence is not required. You may issue authorization letter in the name of your father to collect NOC and original documents on your behalf. In authorization letter don’t forget to mention the details of id proof which your father will be carrying @ the time of collecting NOC and original documents.
Regarding prepayment, it should be from your bank account to avoid pre-closure penalty. Also, you should provide bank statement confirming source of funds i.e. you are pre-paying from own source. Pre-payment can be done by anyone provided its from your account and person is carrying proof of source provided by you. While making pre-payment, kindly give written instruction to bank that your representative i.e. your father will collect the documents in-person from branch & documents should not be sent through courier. You can give 2nd authorization letter to your father regarding same and authorizing him to make payment on your behalf. .
Thank you very much Nitin! Appreciate your help. I will do as you suggested.
Hello Nitin… Looking for home loan topup pre closure with Axis bank – what all documents request to bank in this process… Kindly assist.
No documents required as such..At max, bank may ask for source of fund so just carry bank statement of account from which you are making the payment.
Thank you, Nitin – as usual your assistance always act as a mentor to me in various topics.
One more thing missed out – What all documents should I ask request to bank as part of topup loan closure?
Umakant
Payment receipt is sufficient.
Hi Nitin – Greetings.
Once again seeking your guidance on below.
-> I have a home loan account outstanding of Rs.7.5L with tenure of 30 months remaining (emi Rs.29K) with interest rate of 11.50%
-> Additional, have a topup loan of outstanding 90K with tenure of 9 months remaining (Rs.10.5K) with interest rate of 13.25%
I am a freelancing consultant; having current project is at closure phase – no visibility as of now about next assignment. I can able to pre-close above loan liabilities latest by Jan-2014. Additional residence property is opted with own funding (NO home loan).
I would like to know what would be the best option to execute out of two below or any good suggestion other than mentioned…
1) Pre-closure of home loan / topup loan in the month Jan-2014.
2) To continue EMIs till end of the available tenure.
Thanks in advance.
Umakant
As u have mentioned, you are a freelancer therefore you should keep atleast 6 months monthly household expenses in emergency fund. After provisioning for emergency fund, if you have surplus funds then you may close your loans with 1st priority to top up loan as interest is high on this.
Thanks Nitin.
What about home loan – should I go for pre-closure or continue with rest of the tenure?
I can save approx. 1L interest if I go for home loan pre-closure rather than continuing till end.
Pl suggest.
If you have funds to close Home Loan then pls close the same. I only mentioned that 1st top up loan should closed before home loan as ROI is high for top up loan.
Fine; Thanks Nitin.
Hi Nitin, I had taken some mortgage loan from a bank and now I did full and final settlement of my dues with the bank because I was a defaulter. Now, bank has issued me a final settlement letter and final payment money receipt also I have. But already it is 1 month over and they have not returned my original home deed and other documents along with NOC. So, what I should I do now? Please suggest. Earlier they said that they will return me everything after 1 month of final settlement. What I should I do now?
As you have done Settlement with bank, it will take some time. As the bank will enter your entry in their account books as “settled” and will report to CIBIL regarding payment default & subsequent settlement. In normal scenario with no default, account book entry & CIBIL entry is parallel process so documents are released within 2-3 weeks. In your case, before releasing documents bank need confirmation from account/finance department & CIBIL. In settlement cases it takes between 6-8 weeks to release document.
At the same time you can register complaint with Grievance Redressal Cell of bank regarding delay in release of documents.
Nitin, Thanks for your reply. But I am little worried regarding one thing. I did this settlement with the bank by my own. I have not taken any lawyer for this. One of bank’s official manager has done all this process. So, was it OK or should I have done this through bank’s legal department? I have no idea about this. Please suggest. Is there any possibility of being harassed by the bank to get my original documents? I am totally in dark and worried about this. Please help me. When last week contacted with that said manager, he told me over phone that my loan account is closed and now it’s a matter of time to reach my documents from their Mumbai office. Is he telling true? Please help me. Thanks!
You need not to worry. For you Bank manager is Bank Representative.
As i mentioned in my other comments that all important property documents are kept by banks in centralized repositories & these are normally located in Mumbai. Bank Manager is telling you right facts.
Also, bank asked me to bring 10 rupees court stamp paper during taking back my original deed and other documents. Is it necessary really? Please tell me. Thanks!
Not necessary as such. I think bank will take acknowledgement from you on this stamp paper that you have received your original documents from bank. Still you can check with bank why it is required.
Dear Nitin, So should I proceed to sign in the stamp paper as they are saying it is necessary for acknowledgement as you said. Similarly they will also provide us the same one from their end. But they told us to keep our stamp paper blank as they will write it by their own. Is it OK?
Its OK to proceed. There is no harm in providing acknowledgement on stamp paper.
Hi Nitin, Thanks or your help so far. Just last couple of query please before I go to take all my original documents from the bank on Monday. 1) Bank is asking copy of voter ID card, Pan card and two passport copy photo each for both my father and mother to bring. and 2) Though my father signed all paper at the time of taking this mortgage loan but they are telling my mom also to go there for signing papers because this loan taken at the name of both my parents. Please tell me is that correct way bank is doing? and what should I do now please suggest??? Any suggestion from your side would be appreciable regarding taking my documents back.
1. Before handing over documents, Banks normally check govt issued identity proof and retain xerox.
2. All the Borrowers should be present at the time of collecting original documents else you can take authorization letter from your mother & father to handover documents to you. You need to carry original id proof of your father & mother along with authorization letter.
Hi Nitin, wanted an advice from you.I have taken a home loan 5 years ago for 16.5 Lakhs and topped it up with 3.5 Lakhs later from federal bank. Now I am planning to repay 5 Lakhs as I got some surplus funds. Is there any penalty for preclosure. What’s your opinion on step by step preclosure with small amounts (like 5 Lakhs )?. Currently the interest rate I am paying is close to 14%
As per RBI guidelines there is no penalty for pre-payment or pre-closure.
I would suggest to pre-close top up loan first as the interest on top-up loan is high compared to home loan.
It is always advisable to prepay small amounts at regular intervals whenever you have surplus funds to reduce interest burden. Home Loan should be closed as soon as possible.
Also you may consider reducing your ROI by paying conversion fees.
Hi Nitin,
I’ve got a Home loan from HDFC, the property is under construction and I’m planning to sell it off. The builder has accepted to give a NOC to proceed with the sale.
What is the process to be followed in case of pre-closing the loan with HDFC and how do i get the lien removed before sale? since the property is under construction, full loan is not yet disbursed. Should I get another NOC from HDFC to sell the property.
The buyer is planning to get loan from a different bank, then will i be getting the full sale consideration (which in turn will be used for closing the loan with HDFC and paying the balances due to builder) or the only the constructed part (the amount already paid to builder) from the buyer and the balance will be paid by the buyer to the builder directly?
I am assuming registration is still not done for the property. If this is the case than its quite simple. You need to execute Tri-party agreement between you, buyer and builder. Now this transaction will have 3 components i.e. Amount already paid to the builder, Amount to be paid to the builder and Your profit on sale.
Lets understand with e.g. You bought a flat of 50 lacs from builder & HDFC already paid 20 Lacs to Builder. Now you decided to sell at 70 Lacs than your tri-party agreement will be of 70 lacs. Under this agreement buyer need to arrange 70 Lacs. Buyer will arrange 70 Lacs in 2 part (a) His/her contribution & (b) Home Loan. It is his headache, how he manage his funds. Now either Buyer’s bank or Buyer will clear your loan of 20 lacs i.e. amount already paid to builder by HDFC. Buyers bank or Buyer will pay your profit i.e. 20 lacs. In normal scenario your profit will be paid by buyer only from his/her own source. Rest 30 Lacs will be paid to builder directly by Buyers bank or by Buyer depending on his Home Loan eligibility.
Also i am sure, builder will charge some transfer fees for this transaction normally Rs 200 psf. Please check your agreement with builder. You need to discuss with buyer who will bear this cost.
HDFC will issue NOC only after loan closure otherwise you don’t need any NOC from HDFC to sell your property.
Once your loan with HDFC is closed, HDFC will remove the lien. Moreover removing lien is not your headache as such. Lien is on property not on borrower.
Hi Nitin,
The Bank has lost one of papers from the sale deed and now they say that they will get the certified copy from sub registrar and hand over to me and also issue an apology letter. I have not collected the original sale deed from them and not signed any acknowledgement. What should I do? Is the certified copy of lost page is good enough or I should ask for something else? Thank you in advance to help me out.
Pls check my following post on same topic
https://www.nitinbhatia.in/home-loan/original-property-documents-lost-by-bank/
Hi nitin,
I would like to know the procedure to remove the name of a lender from our ancesterial property? The loan was taken in 1945 and it seems to have been repaid in 1968. As per by Uncle the amount was paid in court in pune. However, we do not have the receipts for the transaction. Now I want to know
1. can the debt / lien be considered time barred and the lenders name be removed from the property card?
2. what is the procedure to get a copy of the old record i.e. receipt of the amount paid in the court.
Any directions will help….
Prasad
1. Answer is No, if there is any lien on property than you need a payment proof & NOC from lender to remove property lien. The lien can be removed from local registrar office.
2. You may visit local Court to get old records. As all the old records were handwritten (not sure whether computerized in your area or not) so it might take time to get the same. You can give application to retrieve the same.
At least you need correct month or day when payment was made else it is impossible to get the same. At the same you can visit local tehsildar office as they also have land records & check if you can get any help from tehsil office. In older times, any payment in court for property was intimated to Tehsil office. If you get communication from court to tehsil office than it will help to remove lien.
The above process is standard one but may change from state to state.
I wanted to know how much time bank will take to give back my original paper after closure of home loan
Banks normally take 2-3 weeks to return original docs after home loan closure
Hello Nitin,
Need your expert advice.
Can bank block the home loan noc because of some dues pending of the credit card past several years.
I mean i have cleared my home loan but there was a lost card which has some outstanding. so the bank has blocked the Home loan NOC and are presurrsing me to clear the credit card outstanding.
Please advice.
No, Legally bank cannot stop your NOC of Home Loan if it is completely paid. It cannot link Home Loan NOC with other account outstanding. Outstanding of credit card should be handled separately by bank.
You should register written complaint with bank and submit to bank. Don’t mention anything about Credit card in complaint. Do mention in complaint that you have paid your Home Loan (attach xerox of payment receipts) and if NOC is not provided within 7 working day then you will approach RBI Bank Ombudsmen & consumer forum for same. Take acknowledgement of complaint from bank.
hello nitin
i completed my home mortgage loan but bank does not issue register noc because city serve office paper on put up bank name & delete bank name only the document of register noc but bank say go to bank lawyer & making register noc but bank charge this processor so please give me helpful suggestion as early as possible
It is the responsibility of bank to issue NOC. You may give written complaint to bank & request them to issue the NOC. Don’t forget to take the acknowledgement of your complaint from bank official. For NOC you need not to pay single penny.
hi nitin,
The above information was useful, but need an advice if banks ask for registartion papers before sanctioning loan.We took a flat which is under construction, and applying loan through PNB, now before sanctioning they r asking to sumbit registartion documents along with other documents n three months EMI on the basis of security…..Is it right to do registartion initially as its generally done after completion….
nisha
Ideally PNBHFL should not ask for sale deed for loan approval as property is still under construction. I would suggest you to check with PNBHFL, the specific reason for same.
3 Month EMI as security is fine. Though registration is done when the construction is completed but some times it is done on 90%-95% completion. Its a common practice.
Dear Nitin,
Greetings,
Your post is very useful, Thanks for the post.
I am an NRI, planning pre-closure of my home loan (floating rate) with ICICIHFC, property in Navi Mumbai.
I got a loan from a bank in saudi which is interest free which I am planning to deposit in my wife (Resident Indian)account (co-applicant of loan but not co-owner of property).
I need your advice, I dont want to pay any charges for preclosure.
For Variable/Floating interest rate home loan there are no pre-closure charges. For fixed interest rate Home Loan, you need to pay 2% penalty for pre-closure.
Sir,
I hold a sbi htl loan since 2010. I have decided to close the same in coming months. While availing the loan the bank had mortgaged the property. Now while preclosing, do i need to visit the registrar office to re register the property in my name. Or will the document become void once the NOC is issued by the bank? what are all the other formalities to be followed while pre closing?
Thanks
Once the NOC is issued by the bank, the Mortgage deed stands NULL & VOID legally. You need to check with Registrar office whether any lien is put by bank on your property, If yes than you need to get it removed by providing NOC & other documents.
Just take care of 5 points mentioned by me in post, nothing else is required.
Sir,
Do we need to pay government in this process. I am taking help of a lawyer for Bank Of Baroda Homeloan closure lien cancellation and the lawyer advised that we need to take a challan of Rs 25000 to pay at government office as a part of this process. Could you please let me know if this payment is normal. Thanks.
Seems something fishy. Please let me know the challan no under which the payment will be made than only i will be able to suggest.
Hello Dear Nitin,
Im impressed!
By your expertise.
My Queries:
I live in a different state than my home loan bank (SBI)
I am closing my home loan. contacted the Manager over phone. he advised me to close it online.
Is it possible? I fail to see the option in the link.
Will the closure procedure take two working days?
I am taking two days leave to travel to Gujarat for this.
Kindly advice.
Thanks for liking the posts & blog. To answer your queries i am assuming that your SBI Home Loan account is linked to your SBI Savings account through Internet Banking.
You are right that there is no specific option to close SBI Home Loan online as the current principal outstanding is not available through internet banking. You can make prepayment to your SBI Home loan account online therefore you can do either of following to close your Home Loan
1. Check with your Home Loan branch the principal outstanding as on date & make exact online payment to your SBI Home Loan account same day.
2. Visit any nearest SBI branch which service Home Loans. Check your principal outstanding as on date and pay the exact amount through DD or Cheque.
Personally i will not recommend online closure because of 2 reasons
1. If you close the Home Loan by making payment at SBI Branch than you will receive confirmation receipt from SBI that you have made a full & final payment for Home Loan closure and current outstanding is 0. In online payment, you will only receive payment receipt.
2. Immediately after making payment, you can submit a written application to SBI stating that you have closed your Home Loan and you would like to collect your original documents from SBI branch nearest to your current residence (Even if it is in other city) else they might courier original documents to your registered address. It is advisable to collect documents physically from branch after cross checking the same as i mentioned in my post also. Take acknowledgement of your this request.
As all SBI Home Loan branches are well connected therefore you can operate your Home Loan from any branch. You need not to visit Home Branch for same.
After loan closure, you will receive NOC and original documents within 2-3 weeks times therefore Home Loan closure process will take atleast this much time after settlement of principal outstanding.
Hello Nithin ji,
Thank you very much for your post, it will help me for sure while closing my Housing loan, I would like to know that do I need to pay any extra cost for closing home loan, I was told by bank that my amount will be fixed for 3 years of span, and I am planning to close it in 2 years. Thanks
In Fixed Interest Rate Home Loan there is pre-payment penalty like 2% of outstanding loan amount or you cannot pay more than 25% of outstanding loan amount without penalty. In Floating Interest Rate Home Loan, there are no Pre-Payment / Pre-Closure charges. Please check your Home Loan agreement for more details.
Hello and Thank you for sharing such imp information.
Have a query: Can anybody guide on how do we inform CIBIL (online) to update our loan closure information?
Thankyou,
All banks update CIBIL database once in 45 days so you need not to do anything, its bank’s responsibility. After Home Loan closure, pls pull out your CIBIL report after 60 days just to cross check whether your bank has updated your Loan account or not. It should be reported as closed in CIBIL database by your Bank.
Dear Nitin – I have a property with outstanding loan from LIC HFL. I am selling this property to a buyer who is also taking loan from LIC HFL. LIC has told that two cheques would be prepared – One equivalent to my loan amount and 2nd for the differential amount on my name. For registration, LIC HFL will give copies of the cheques, and once the registration is done and the new sale deed is submitted to LIC HFL, they will release 1st cheque to me for settling my loan account. Once my loan account is settled, they will release the second cheque to me. My queries are:
1) If my loan account would be settled after the registration, then I will not have the original property documents at the time of registration. Is it possible to get the registration done without the original documents? LIC agent is telling that it is possible, but I am a bit confused.
2) Should I get any letter from LIC HFL for selling the property; I mean, LIC should not question me regarding the sale of property on which the loan is outstanding? When I checked with LIC, they said not required, but I thought to take your advice.
3) In this case, what all documents should I collect at the time of my loan account closure – 1) Account Statement showing ZERO balance 2) NOC – Do I need this? 3) Original Property Papers – Do I need these? 4) I will inform CIBIL with in 60 days as advised by you.
Regards,
Yaju
1. You don’t need original documents for registration but as a normal process, the cheques are handed over to Buyer / Seller at the time of registration.
2. You just need to inform them in writing and take acknowledgement. As the buyer is also taking loan from LIC HFL therefore you might have already handed over balance outstanding statement + list of original documents with LIC to the potential buyer
3. NOC + Full & Final Statement + All cheques handed over to LIC HFL as guarantee + Any other documents signed & submitted by you except MODT. You will not get original documents back as they will be transferred to new loan account internally by LIC HFL
4. You need not to inform, it will be updated automatically. You need to inform only when LIC HFL will not update within 60 days. Just pull out your CIBIL report 60 days after the loan is closed & check whether loan account is closed or not. If not closed than inform CIBIL regarding the same.
Thanks for the quick reply, Nitin.
Very helpful and useful information – Truly appreciate.
Regards,
Yaju
Thanks Nitin for such a informative article.
I have Home loan from HDFC for my flat. Now i am in US and paying additional amounts to EMIs to finish loan faster. If my loan closure happens while i am in USA,
1. does bank hold on to all documents and formalities till i personally visit bank?
2. Does bank returns all documents immediately after loan closure or is it time consuming process?
3. Is it advisable to be in India while loan closure?
4. Can someone else(family member) collect all home documents from bank, if i give power of attorney?
Thanks for liking the post. To answer your queries
1. No, they will courier the documents to registered address if you don’t give specific request to collect in-person from branch.
2. Its takes 2-3 weeks time
3. No
4. Yes, it is advisable to nominate someone who can collect on your behalf..You don’t need Power of Attorney just give Letter of Authorization and mention PAN of person who will collect along with name, relation and other details…Before closing Home Loan, give a written request that documents will be collected from XYZ branch in-person. As missing document is most common problem therefore someone should check page by page before acknowledging the receipt (As i mentioned in my post also)
I am having Home loan worth 18 lacs since august 2011 with a interest rate of 10.75%
I want to close my accout .Please tell me how the interest will be calculated as I assume emi do cover part of principal and part of interest .Also how do i assure that my CIBIL records is updated
You may get the detailed statement from bank with breakup or you can use following EMI calculator to find out break up of interest & principal component. Just check your CIBIL report after 60 days from date of loan closure. Your Loan account will be shown as closed.
https://www.nitinbhatia.in/home-loan/emi-calculator/
Hi Nitin,
Thanks for your post, it is really very informative. I have a question here. We purchased a flat in Delhi in March 2011, availing a home loan of 25L, with 25k emi. Currently the outstanding amount is 20L as we prepaid some amount. Now due to relocation, we want to sell the property. Can you please tell me the process of repaying the loan in case the prospective buyer of the property does not want to avail a loan from the same/other bank? My loan is in ICICI Bank.
Regards,
Archana.
Suppose you are selling your property for 30 Lacs and as your current Home Loan outstanding is 20 Lacs. In this case, the buyer will pay 20 Lacs directly to ICICI Bank towards your Home Loan account and Close your Home Loan. Rest 10 Lacs he will pay to u.
Hi Nitin
I have a query on the similar lines. I had taken a HL for an amount of 18 lacs
Till date i have paid 4.45 lacs (Principal) and around 12.5 lacs on interest. So the total installment i have paid to the bank till date is : ~17 lacs
Suppose if i want to sell it for 30 lacs. What amount should I be paying to the bank to close my HL ?
P.S: Your articles are quite informative. You give a very lucid explanation for every query. !! Keep it up
Thanks for liking the Blog !!!
You will be paying approx 13.55 Lac to bank towards Principal Repayment. For exact amount, you may request for detailed statement from bank.
I took a homeloan at august 2011 for 6 yrs of entire tenure , now i wanted to close it. Can i pre-close the account. I heard that if we close homeloan before 5 years, we have some tax implications, and all the tax exception claimed will be reversed and all that amount has to be paid by us ? is it true ?plz comment
Yes, you can pre-close your home loan.
If the Home Loan is closed within five years from the end of FY year in which possession was taken than all the tax deduction allowed for Principal repayment in previous FY shall be withdrawn. These deductions will be treated as income for the year in which the property is sold. It is only applicable to Principal repayment deductions under section 80C.
Any deduction claimed against Interest payment under section 24(b) will not be reversed.
Thanks for you reply..
Is this withdrawal fo the tax deducted is applicable when i sell the property ? or its applicable (the withdrawal of principal) when i close the home loan itself ?
It is applicable only if the property is sold before 5 years from the end of FY in which possession was received. In case, only Home Loan is closed than this clause is not applicable.
Dear Nitin,
Just i read your valuable info for loan closure.
And immediately sent email to Bank for CIBIL update and Lien.
Thank you so much for this valuable info.
I was not aware and my home loan was closed 2 years back.
Thanks for liking the post.
Dear sir,
I have taken housing loan from SBI and 50% instalment was released before 4 years. By this time I have saved enough amount to repay the loan and rest amount payable to builder.
Can I close the loan before property registration and before creating equaitable mortgage.
Thanks
You can close the Home Loan before property is registered.
Hi Nitin,
I am an applicant for SBI Home Loan. The Officer who collected the documents insisted that I give the Original receipts of advance payments towards purchase of flat. Is this a norm to collect the original recipet of advance payment rather than a copy of the same. Can I request the bank to consider to accept the copy rather than the original reciept.
I concur with bank in this case. All original documents including payment receipts are bank property till you close your Home Loan. You may retain the copy of same for your reference and take acknowledgement from bank that you have submitted original to bank.
Hi Nitin,
Your blogs very much useful.
I am having housing loan with DHFL with current outstanding principal around 14lakhs, I am planning to start making a partial prepayment around 50thousand-1Lakh per year additional to the EMI. Please advise whether making partial prepayment is good or should I accumulate the money and close the loan once for all.
I will suggest you to make partial prepayment as and when you have surplus funds and keep EMI same i.e. don’t reduce EMI amount.
Hi Nitin,………. I have a mortage loan from RBS 2007, due to some financial crisis i havent paid for 18 months approx in the middle i have paid 70k, 20k…but at last RBS have transfered my loan to Kotak Mahindra and they are asking to close the loan account in 90 days…or else they auction the flat. so my question cant we pay the amount in EMI like we used to pay for RBS …Y r they forcing or demanding to close in 90 days…How can a common man pay 12 lakhs in 90 days..Is there any option..?
It seems bank has declared your Home Loan as NPA (Non-Performing Asset) or Distressed. I would suggest you to discuss your case with senior official of bank. You can request bank to re-structure your Home Loan and not to auction the property. If you can pay EMI regularly from now on than you can give it in writing to bank that post re-structuring you will pay EMI’s regularly. I am sure bank will re-structure your home loan. Also apprise the bank, reasons why you were not able to pay EMI’s for 18 months due to some financial crisis. In short, make a case of 2-3 page with complete details and request for re-structuring of Home Loan. Take acknowledgement of your this request from bank and wait for banks response.
If bank does not agree to re-structure than you may move application in Civil Court and obtain temporary injunction / Stay order restraining bank from auctioning your property.
Thank you so much for the reply..But as the loan application moved from RBS to Kotak Mahindra bank we need to dicuss with kotak bank or RBS…Plz let me know
Please contact Kotak Mahindra Bank.
thanks u so much..Nitin
Congratulations on a very well written article!
Thanks for liking the post. Keep reading !!!
Hi Nitin ,
Thank you for sharing such a valuable information , I have a home loan with SBI bank which i am thinking to close now.
Can you tell me which documents i required from my side to smoothly closure as well as which document i should demand from bank after closure and thinks to make sure on the legal prospect.
Thanks in Advance !!!!!
You just need id proof ideally PAN to get all documents from bank. At the time of loan, bank must have issued acknowledgement with list of documents submitted by you with bank in original. Bank will return these documents at the time of closure.
Also bank will issue NOC stating your Home Loan is closed and now bank has NO RIGHTS on your property. NOC from bank is must
Hi Nitin!
Can I take a home loan again once I have paid an existing home loan. Also can I get tax benifits on that home loan.
Yes, you can avail Home Loan again. 2nd property will be considered as Let Out Property & you can avail Tax Benefits accordingly. Also note that second house will qualify as “wealth”. You need to pay wealth tax at 1% of property value (if net wealth is more than Rs 30 lacs)
Hello Nitin
Very informative post thanks for same, can you share similar points for pre-closing of Personal Loan
Thanks for liking the post. I will definitely write a post on Pre-Closure of Personal Loan
Appreciate your quick reply, actually i am in process of transferring my PL from one bank to another due to better interest rates, new bank has given me DD for outstanding as per repayment scheduled, i need to know how to proceed with my old bank and pre-close by submitting this DD. are there any differential charge i need to pay if yes what are they and once PL close what all document i should obtain from this Bank and how this information will be translate in CIBIL credit rating
You can deposit DD against your Personal Loan Account. Bank will issue NOC within 2-3 weeks that you have closed your Personal Loan. Within 45 days bank will update CIBIL Database. You may pull out your CIBIL report after 60 days to check whether bank has updated it or not.
You need to check pre-payment penalty clause on Personal Loan closure with bank. Bank will return the cheques submitted by you. Normally there are 4 cheques. One cheque is upto total loan value and 3 cheques equivalent to EMI amount. Also if you submitted any other document as security will be returned.
Hi Nitin,
Thanks so much for such valuable information…!!!
I am in US since 1.5 years. My Home loan EMIs are going to
be completed next month. I did make some Pre-EMIs payments and after that
normal EMI was continued. The last EMI I have to give to the bank in next
month.
I am planning to come back to India by the end of this
year. My Question to you;
A: Is it possible that I can ask Bank to keep to Property
document by the time I come back to India?
B: If Yes, Do I need to pay any charges to the back for
keeping my property documents?
Thanks,
Vinay.
A: Its at the sole discretion of the bank but i don’t think so. Secondly, even if bank will keep documents than they will keep it at branch location instead of storing at professionally managed facility.
B: You need to check with Bank regarding the charges. There is no standard procedure for this scenario.
Very informative with key points to consider. I have closed my loan with SBI and got back my documents including a letter & deed of reconveyance to Sub registrar by the bank. Can you explain what is the process to execute deed of reconveyance? Should one visit sub registrar office and submit any forms and any additional expenses involved with this process?
As you received NOC and Deed of Reconveyance from bank therefore no further action required from your end. In my opinion there is no need of Another deed of Reconveynace for reconveying mortgaged property. You may get Encumbrance Certificate from Registrar office to check whether lien is removed from property or not. If lien is removed than no need to worry.
Thank you very much for the clarification.
Hi Mr. Nitin,
I had taken a loan from HDFC on Jan’11 on a fixed rate basis. I intend to sell of the property now. The balance principal amount is 8.5 lacs. Will it attract any pre-closure panelty from HDFC. The balance principal would be paid by buyer either by bank or his own sources.
Thank u.
If you are paying from own source than there is no prepayment penalty but if payment is through refinancing from any other bank, HFC or financial institution than HDFC will charge 2% + ST + Surcharge as prepayment penalty on outstanding Home Loan amount.
Hi Nithin,
Thanks for the information. I had a different question with regards to cancelling SBI home loan which I did not for any disbursement. Last year I availed home loan from SBI. They sanctioned it very late and I had to do the payments to the builder myself without home loan. So I did not go for any disbursements with them for more than 8 months.
Recently I visited SBI branch to get all documents from them as I never availed the loan. They took written application and said it will be sent to SBI RACPC Bangalore. They say they don’t know how long it will take to return back all documents. I’m sure they will not co-operate in this matter anyways. Is there a way I can speed up this process ?
Regards.
Rashmi
With SBI you need to adopt DIY (Do it yourself) approach. The process is as follows
1. Request for a/c closure letter from SBI branch
2. Make sure the a/c closure letter issued by your branch is signed by the branch official.
3. Call SBI RACPC Koramangala on 080 2594 3801, and ask for Ms.Megha or Ms.Bijuna.
4. Fix up a time when you can meet them to hand over the letter. Also ask them if you can collect all original documents during your first visit.
5. Visit RACPC along with your joint account holder (if any) at the agreed time– carry each person’s original ID proof and collect all original documents.
Ms.Megha or Ms.Bijuna are usually available between 10:30 and 4:30 – Monday to Friday. On Saturdays, they close early – make sure you check via phone before showing up.
RACPC location: https://plus.google.com/109852014010724917322/about?gl=in&hl=en
Hi Niitin, Thanks
Very Informative,
It is very useful As I am planning to close home loan by next year
Thanks for liking the article !!
Hi Nitin,
I would like to know how to check whether builder has taken loan or not. Normally builder verbally confirms there is no loan, 2nd option is to check with registrar. Is it mandatory to register the mortgage with registrar, if not then chances are there builder can bypass this step. As mentioned by you in case of auto loan it is mentioned on vehicle “hypotheticated to —- bank” in builder how to check. Please advise
As a 1st Step you may check the original documents of Land with builder. If the land is mortgaged than builder will not have originals with him. 2nd step is you may pull out encumbrance certificate of land from registrar office. If there is any lien on the land than you will come to know from Encumbrance Certificate. The lien is put by the lender on the land and builder cannot bypass the same. These 2 points were related to land of the project. If the title of plot is mortgaged than you may ask for NOC from Bank that builder can sell the flats in the project to recover the loan.
There is probability that Builder might have mortgaged the project. Though legally builder cannot sell the project if it is mortgaged and vice versa i.e. builder cannot mortgage after the project is sold. To safeguard your interest, you may include indemnity clause in your agreement with builder. Ideally such clauses are included and are standard clauses but still you may hire a local lawyer who can check whether such clauses are included in your agreement or not.