Know All about the Home Loan Foreclosure Procedure

The Home Loan foreclosure procedure is fairly simple and often amounts to a lot of relief once you foreclose your loan entirely. The effort of applying for a Home Loan, making a down payment, and paying EMIs each month — bears the most pleasurable fruit when you have full ownership of the house.

While you celebrate the achievements of owning a debt-free property, you need to get done with certain tasks that have a direct effect on the credit score as well as the property records. Being diligent on this front will relieve you of hassles at the time of property transfer or sale. When embarking on the Home Loan foreclosure process, you must keep the following in mind.  

Maintain this Checklist When Going for Home Loan Foreclosure

A housing loan account is considered closed when the lending institution declares the same from its end. There are certain formalities that need to be completed and therefore, we’ve listed down the factors you must keep in mind once you decide to close your home loan account.  

1. Collect Original Documents

When applying for a housing loan from any institution, a borrower leaves all the original documents with the financial lender, and the borrower is only left with the photocopies. When it is time to foreclose the loan, make sure you ask the lender to return the original documents. Also, you must make sure that the documents that you’ve received are in good shape. Here is the list of documents that you must collect from your lender: 

• Title and sale deed
• Power of Attorney
• Possession letter
• Home loan agreement
• Payment receipts

Also, if you do not receive any of the submitted documents from the lending institution, you must right away inform the lender. 

2. Get Lien on the Property Terminated

A lien permits the lender rights on a property unless the borrower clears the debt, and a lien also does not permit selling off the property. The lenders place a lien against the property so that if you fail to pay the EMIs, the lender can sell your property to recover the loan amount.

Therefore, after you have ended up paying all EMIs and closed your home loan account, it’s imperative to get the lien removed to enjoy 100% ownership of the property and to be able to sell in the future without any inconvenience. To get the lien terminated, you’ll be required to visit the registrar’s office and the lender’s representative.

​Additional Read: Home Loan Terminologies You Must be Aware Of 

3. Get the ‘No Dues’ Certificate (NDC)

Also, known as the No Objection Certificate (NOC), an NDC is one of the mandatory documents you must obtain from your home loan lender as soon as you are done making the final payment on the loan. An NDC also indicates that you have successfully paid all EMIs to your lender and that there are no more outstanding dues from your end. Hence, the lending institution no longer has authority over the property.

The NOC must possess details, such as the borrower’s name, loan amount, property’s address, loan account number, and the start date and close date of the Home Loan account. Also, it’s advisable to keep NOC photocopies so that you can enjoy seamless dealings with other lenders soon.   

4. Ask for the Updated Non-Encumbrance Certificate

Once you’ve paid the whole loan amount as part of the home loan foreclosure procedure and have also removed the lien from the property, visit the Registrar’s Office and then apply for a fresh Non- Encumbrance Certificate. It’s a legal document that contains detailed records of financial transactions being carried out related to the property.  

5. Collect the Security Cheque

In case you’ve submitted a post-dated security cheque to your lending institution, ensure that you collect them back when the home loan foreclosure procedure is complete.

6. Make Sure that Your Credit Score is Updated in the Latest Report

A desirable credit score (750 and/or above) plays a crucial role in getting a loan (both unsecured and secured) without inconveniences. Therefore, as you pay the final EMI of your housing loan, you need to ensure that your lender updates the information to the credit bureau. It's worth noting that timely loan foreclosure can positively impact your credit score and overall credit history, while delaying or defaulting on payments can have a negative effect on your CIBIL score, potentially making it harder for you to secure loans in the future." 

Also Read: Tips to Maintain Your Business CIBIL Score Above 700

The updated credit score takes about a month to reflect in the credit history. You should also be prepared to do regular follow-ups with the lender. Also, if your financial lender has, by mistake, reported wrong information, it’s your responsibility to get that rectified as soon as possible.

NOTE: Readers should note that the information provided in the page is for generic purposes and are not specific to our company policies.

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