Paid off your home loan? You need to complete this following checklist

• Once you pay the last outstanding payment, you need to write to the lender asking for the loan closure statement/NOC certificate.
  
• It is necessary to retrieve all the original documents you provided to the lender.
  
• Once you close your loan, request the lender to update your credit records with the credit bureaus.
  

If you've fully repaid your home but are experiencing delays from banks in providing your mortgaged property documents, there is good news for you. The Reserve Bank of India (RBI) recently issued a directive instructing banks and other financial institutions to release the original property documents within 30 days following the complete repayment and closure of the loan account. For any delay the bank or financial institution has to pay ₹5,000 per day to the borrower.

Paying off a home loan takes years and paying it off is a definite financial milestone for all homeowners. However, while that may be a cause of celebration, your job is not done, yet. There are certain loose ends that still need to be tied up to ensure due diligence and peace of mind. We take a look.

Collect the NOC certificate

Once you pay the last outstanding payment, you need to write to the lender again stating the facts and asking for the loan closure statement/ no objection certificate (NOC) certificate. It is also referred to as a no dues certificate (NDC).

“The NOC certificate summarises the home loan details, for example, the home loan agreement details, EMI details, principal outstanding, overdue interest, total receivables, etc,” says Adhil Shetty, CEO, BankBazaar, an online financial marketplace.

Secondly, since the loan has been closed, it should state that all the dues are paid by the borrower and the lender does not have any rights or claims on the property. Make sure this paper is duly signed and has the lender's stamp.

Retrieve original documents

It is very important to retrieve all the original documents you provided to the lender when you initially took out the loan. When you first obtained the loan, the bank would have furnished a list of the documents you submitted. “If the lender was holding any original property documents as collateral, make sure to collect them back,” says Atul Monga, co-founder and CEO, BASIC Home Loan, an automated home loan platform.

Ideally, it's advisable to personally collect your documents from the lender rather than having them sent to you. This way, you can verify the documents at the lender's office to ensure that nothing is missing.

Before signing any acknowledgment confirming the receipt of the documents, it is essential to thoroughly inspect all the pages of each document to ensure that none of them are lost or misplaced. This diligence helps safeguard your legal and financial interests by maintaining a complete and accurate record of your loan-related documents.

Remove the lien on your property

In certain situations, lenders may place a lien on a property, essentially restricting the property owner from selling it. When the loan has been fully repaid, it becomes necessary to remove this lien. The process typically involves a visit to the Registrar's Office, accompanied by an official from the lending institution.

This procedure ensures the formal removal of the lien, thereby allowing the property owner to regain full control and rights over the property, including the ability to sell it without any encumbrances.

Obtain the updated encumbrance certificate

The encumbrance certificate serves as a comprehensive record of all financial transactions related to a property. When a new encumbrance certificate is issued, it contains crucial information such as the transfer of home ownership, any existing liens on the property, and the details of any lien removal, particularly in the case of a home loan.

This document holds legal significance as it certifies that the property is free from any outstanding financial liabilities. “It certifies that a particular property is free from any monetary or legal liabilities, such as outstanding mortgages or loans,” says Monga. Obtaining a clear encumbrance certificate is an important step to establish that the property is unencumbered and ready for any legal or financial transactions, such as property sales or transfers.

Update credit report: Once you close your loan, request the lender to update your credit records with the credit bureaus. “Check your credit report after the stipulated time, usually 30 days, to make sure the changes reflect. If not, write to the credit bureau directly with a copy of your NOC and request them to update their records,” says Shetty. Check again after 30 days to ensure that the records are updated.