Home Loan is one of the heaviest financial burdens owing to the hefty EMI. The very thought of closing the home loan and getting complete ownership of the property is very alluring. While availing of the home loan you will have chosen a longer tenure for the sake of EMI comfort. But continuing the home loan till maturity is not a wise decision.
If you do so, you will have paid back more than double the amount you will have borrowed., especially with the RBI notification to lenders to stop collecting penalty for foreclosure of prepayment of the home loan. This notification has come as a boon to borrowers who intend to clear the home loan much before maturity. You can pre-close the LIC Home Loan without penalty if availed at a floating rate of interest.
Closing the home loan and getting full ownership will be an excellent development. But the restoration of ownership does not happen by just closing the home loan. Post the closure of the loan; there are a few steps to follow that will prove the liquidation of the loan.
The ICICI home loan will not be considered closed unless the bank declares the same through valid documents. A detailed note on the things to do immediately after the closure of the home loan account is given below for your reference.
Advantages of foreclosure of home loan account
The following are the advantages of foreclosure of a home loan account.
- If the type of home loan interest you have chosen is a floating rate, there will be an additional cost on the foreclosure.
- You will be saving on the interest cost for the rest of the tenure and there will be a reduction in the overall cost of the loan.
- If the home loan interest rate is a fixed rate, then you will have to pay a penalty which depends on the lender you have chosen. If the pre-closure is done during the initial stages, then compared to the interest cost, the additional cost would be much less.
- Your credit score will be updated.
To-do list after the closure of the home loan
#1. Collection of Original Documents
Creating a Mortgage of the Property is a part of the home loan documentation procedure. You will have deposited the original documents pertaining to the property with the lender. If you have availed of an ICICI Home Loan, the original property documents will be in the custody of ICICI Bank.
The bank will have provided you with the list of documents that you would have submitted at the time of creating the mortgage. Once the home loan is closed, ensure to collect the original documents after cross-checking it with the list available with you. The documents could be an Allotment letter, Sale Deed, Khata Certificate, Khata Extract, Tax Paid Receipts, etc. Also, check for continuity of pages in the documents if there are multiple pages.
#2. No Objection Letter from the Lender
A No Objection Letter or a No Dues Letter from the lender will have all the details like the home loan account number, name and address of the borrower, and the date of closure of the account. It will be clearly mentioned that the home loan is settled in full and is considered closed as per their records.
A No Objection Letter from the lender has a great implication on your financial health. It is a vital document and proof of having closed the home loan account. You will need the NOC for the following:
- To claim the original documents from the lender after the closure of the account. If you have closed the LIC Home Loan Account, you will have to place a request with LIC for the original documents along with a copy of the NOC as proof of having settled the loan account in full.
- Sometimes a claim for pending dues in your home loan account may crop up even after the closure of the account. At that time, NOC will serve as valid proof for having settled all the dues in full.
- You will have to submit a NOC to the Credit Bureau to get the credit score updated. If you have to obtain any other loan in the future, your credit history should not reflect any loans outstanding.
- In case the lender files a suit claiming that there are some unsettled dues in your home loan account, then NOC will be valid proof to get a decision in your favour.
#3. Cancellation of lien on the property
The lender will create a lien on the property where all the rights on the property will vest in the lender and will be restored to you only on clearing the closure of the home loan. For ICICI Bank Home Loan, a lien will be created on the property by registering the mortgage at the Registrar’s Office.
On the closure of the account, you have to visit the Registrar’s Office along with a representative of the Bank and get the lien on the property cancelled.
#4. Updation of Cibil Score
Post the closure of the account; the Cibil Score has to be updated. This happens only when the lender transmits the loan closure details to the Credit Bureau.
However, the updation process will take about 2 to 3 weeks. You will have to draw your Credit Report after the closure of the account and verify for updation. If not done, you have to take up the matter with the lender.
#5. Obtain an Up-to-date loan statement of the home loan account
It is crucial, to obtain an up-to-date loan statement from the lender to complete the home loan closure transaction. This will be a valid document in case of any issues that may arise in future with regard to the dues in your home loan account.
#6. Collecting the PDCs (Post Dated Cheques)
LIC or ICICI would have collected Post Dated Cheques for recovery of LIC Home Loan or ICICI Home Loan EMI. On pre-closure, you will have collected the unused PDCs from the lenders.
Keep in mind to follow the procedures mentioned post the home loan closure to avoid any unwanted hassles in the future.