5 Essential Steps to Take When Closing Your Home Loan

The real joy of owning a home comes when you pay off the final dues of your home loan, whether by completing the repayment schedule or through foreclosure. From submitting your home loan application and making the down payment to repaying the last EMI, the entire process reaches its sweetest reward when you finish repayment and gain full ownership of your home.

However, while closing your home loan, it is important to follow these steps to avoid any future complications:

1. Get NOC From Lender

Once you have fully repaid your existing home loan, ensure you obtain the no-objection certificate (NOC), also known as the No Dues Certificate (NDC), from your lender. This certificate confirms that your loan has been repaid in full and no dues remain on your account.

When obtaining the NOC, verify that all relevant details—such as the borrower's name, loan account number, property details against which the loan was taken, and the loan closure date—are correctly mentioned and spelled. The certificate should also clearly state that the lender has no authority or rights over the property, which now solely belongs to the borrower.

2. Recover Original Documents

When closing your home loan, make sure to recover all the documents submitted to the lender during the loan application process. Cross-check the original documents against the list provided by the lender at the time of application and retrieve them after the loan account has been closed. This list typically includes bank account statements, income proof, power of attorney, deed of sale, loan agreement, possession letter, and more. Ensure all documents are in good condition and not damaged or missing.

Additionally, some lenders may have collected security cheques during loan disbursement to recover outstanding amounts in case of a default on future EMIs. It is important to retrieve these cheques along with the original documents once the loan is fully repaid and closed.

3. Ensure Credit Bureau Records Are Updated

Although lenders are usually proactive in informing credit bureaus when you avail a credit card or loan, they may not always notify them promptly when you prepay or close a loan. Sometimes, lenders might forget to update the concerned bureau. Therefore, be sure to request that your lender inform the credit bureaus once your home loan account is closed.

When the lender notifies the credit bureau about the loan closure, the bureau updates its database, and this will be reflected in your credit report. Until the update appears, continue to follow up with your lender. If the lender's specified time-frame passes without an update, consider submitting an online request directly to the credit bureau to update your records.

4. Request Lien Termination at the Registrar's Office

When your lender is unsure about your repayment capacity, it may place a lien on your property. This legal claim gives the lender the right to possess the mortgaged property and prevents you from selling it until the loan is fully repaid. If you default on your loan, the lien allows the lender to sell the property to recover the outstanding dues.

After closing your home loan, ensure you get the lien removed from your city's local registrar's office to avoid any legal issues with property ownership. When doing this, carry your no-objection certificate (NOC), as the registrar may require it to approve the lien termination and release deed.

5. Secure The Updated No Encumbrance Certificate

The encumbrance certificate is a legal document containing detailed records of all financial transactions related to the property mortgaged for your home loan. Once you have closed the loan, the certificate must reflect all repayments and transactions up to the loan closure.

The no encumbrance certificate ensures your property is free from any legal or monetary liabilities, and there is no risk of any hindrance from the lender if you wish to sell the property in the future after closing the home loan.