In my previous blogs, I have mentioned about how banks determine the loan eligibility, the factors they consider, and how we can increase the loan eligibility. Now let’s fast forward, assume that you have been regular in making the EMI payments and finally the day has come what you have been waiting for! The last EMI has been paid and you are having the great feeling of being the proud owner of your house, in the truest sense.
Do remember that still there are a few action items that need to be taken before you go out and celebrate. Let us discuss these action items which are applicable for all types of loans.
Closing a loan can mean differently at various stages. This is a term that can be used when a loan has been sanctioned and is the last step in buying and financing a home. It could be considered as the final settlement wherein all the parties involved in the mortgage loan sign the legal documents. After the signing of the documents is completed, the borrower becomes responsible for the loan. Closing a loan could also mean that the last mortgage payment has been completed and the borrower visits the bank branch to collect all the documents. The borrower is now the owner of the home in its truest sense with no liabilities against it. What a feeling! We will discuss the latter definition in this blog.
While taking a secured loan, you would have obviously hypothecated your documents to the bank. These must be collected back since you now deserve to get them back. Also, you would need these original documents when you decide to sell the property or need to take a loan against it in the future. I have paid off my home loan twice in the past. Years back, when I went to the bank to collect my documents for the first loan, they had kept all the documents very neatly wherein the first page had information of all the documents which were submitted in original when I had availed the loan. It also had my signature. They asked me to verify it once again they all were enclosed so that there was no confusion. What a great process!
Also, go to the bank branch personally and collect the original documents. You would not want to risk the possibility of originals getting misplaced in the courier or someone else misusing them. If for any reason, you cannot collect the documents, then given an authorization letter to someone trusted who can collect the documents.
You must take a NOC (also known as No Dues certificate) from the lender. This letter certified that the entire loan has been paid and there is no outstanding balance for the loan. You may need this NOC to be submitted later when you sell your property, for the satisfaction of the buyer. Also, we want to safeguard our interest, as there could be a possible situation wherein due to some miscommunication, the loan could be still be showing as outstanding and it could reflect in the CIBIL report, which can negatively impact your credit score. Usually, as part of the bank process, the NOC would get sent to you, but just in case you do not receive, please get it from them.
I have mentioned previously how important is the CIBIL report and the CIBIL score. Do ensure that in the CIBIL report, the status for this loan is updated as “Closed” with the closed date mentioned after you pay off the loan. It could take a month or two for this information to be updated in the CIBIL report, but just ensure that this happens.
So when should you check your CIBIL report again? A good practice is to check it after 60 days of closing the loan and verify if there is an entry of “date closed” with a date on it.
Lien is the extra comfort which at times the lender does. The lender keeps the right to sell the property themselves, just in case the borrower does not repay the loan. This is done in the registrar office and therefore when the loan is repaid, this should be taken off. It may happen only in a few cases where a bank was to have extra safety, especially where they have a suspicion that the loan may not get repaid. So, you may just want to check on this point with the lender whether the lien has been done on the property or not. Else, while selling the property, it could be difficult as the latest encumbrance certificate (EC) which would be needed while selling would have that information. You can apply for the EC at any time to verify the same.
Hope this blog was useful. High possibility that nothing would go wrong, but better to be watchful and ensure that you have the property title and all the original documents back with you after the loan is paid off and you can continue to get the happy feeling!
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