Home Loan is the key way of aiding people to buy a home. Though they can prove to be very helpful, they come at the cost of monthly EMIs, which absorb a part of your income during the whole loan tenure. As after a point, people are eager to prepay the loan whenever they get an opportunity. Consider few important things about home loan makes you burden-free and you finally get the complete ownership of your home. The property documents also get transferred from the borrower to the lender. There are a list of documents that you should keep in mind before closing the loan. Those documents are as follows:
- Collecting all the original documents from the borrower
- No Objection Certificate (NOC)
- CIBIL Score
- Make an Estimate for the Final Settlement
- Get a Home Loan Statement
- Encumbrance Certificate
- Get Legal Clearance
Collecting all the original documents from the borrower
At the time of application of home loan, we keep all documents such as Mother Deed and Money Deed, Possession Letter, Power of Attorney and some posted dated cheques. It is important that we collect these documents when we are either transferring or closing the loan.
No Objection Certificate (NOC)
NOC is one of the main documents that you should collect from your lender. It is a certificate that states that your property is debt-free, and you have complete authority over the property. After an NOC has been issued that bank has no relation with the property. However, do check for the details like owner’s name, property description and the date of change of ownership.
CIBIL has an individual’s entire financial data. From active to closed loans, it has every detail. On closing the loan, tell the lender to update your CIBIL score as not updating might hamper your future chances of getting a loan. Since a CIBIL score is the deciding factor for getting a loan, it is important that it is up to date.
Make an Estimate for the Final Settlement
Before closing the loan, ask your lender about the estimate of the loan. You should be aware of the total amount that you are paying. Ensure that there no hidden charges except for the prepayment charge and you know the complete breakdown of the entire amount.
Get a Home Loan Statement
Once you pay the closing amount, collect the home loan statement. It has all the details of your repayment and EMI amount.
An encumbrance certificate a copy that states the property being referred to is free from any financial and lawful liabilities. Also, that the property can be sold as a free title and the possession will come to you with no related things. An encumbrance certificate is to be collected from the registrar’s office and generally, lenders get it.
Get Legal Clearance
Though optional, it is advisable to get a clearance certificate from a lawyer. A clearance certificate ensures all formalities are completed from a legal standpoint. Also, if any issue arises a lawyer will be able to help you out better.
Pre-closing your loan is a dream for many. However, do not rush through it and do it when you’re ready close all the monetary and legal requirements.
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Benefits of Home Loan Prepayment
Prepayment of home loan means paying off the amount of the loan over and above regular EMIs ahead of time. The payment can be done fully or partly, many borrowers prefer to prepay the loan to reduce the substantial financial burden on them.
Home loan prepayment advantages
Pre-paying the loan brings down the outstanding principal amount, which in turn reduces the EMIs. Home loan pre-payment reduces stress and is financially favorable to the borrower. Home loan pre-payment does not immediately influence the credit score of an individual. However, by prepaying and closing the loan account before the end of a tenure period, boosts the credit score of an individual.
- Full prepayment: Full pre-payments involve paying off the entire home loan amount before time during the early period of tenure.
- Part-payments: The home loan amount is paid off in parts. Partial payments of the home loan decrease the principal amount along with the EMIs and total interest on it.