Debt, no matter how insignificant, is always a burden. To be free of debt-related obligations is something every housing loan borrower dreams of. While easy home loans have made buying a house extremely convenient, they are still worrisome. Therefore, most borrowers look for ways to become debt-free as soon as possible, and thankfully, home loan prepayment is an effective way to do that.
If you are thinking of closing your home loan early, use a home loan EMI calculator to first see how many instalments you have left, and whether making a prepayment would indeed be useful. Once you find out that it is, follow the checklist mentioned below to make the process smooth and error-free.
- Get All the Original Documents Back
Whenever you avail of a home loan, your house acts as security against the loan. This means that all the original documents related to the sale, purchase, or initial construction of your house are usually deposited safely with your lender. As you make a home loan online or offline prepayment, you must collect all the documents related to your home from your lender. Make sure you have the original registration certificate, sale/purchase deed, power of attorney, and loan agreement before making the last home loan payment.
- Get a No Dues Certificate from Your Lender
Whenever you make a home loan foreclosure, you must obtain a document that certifies that there is no loan on the house and it can be sold without any objection. A No-Dues Certificate contains details such as the address of your house, the amount of the loan including the home loan interest rate and repayment tenure, loan account number, name of the borrowers, and date of loan starting and closing.
- Get Rid of Lien
Some lenders create a lien when you apply for a home loan. A lien prevents you from selling the property until the housing loan is cleared. If you are prepaying your home loan, you need to take an official consent from your lending institution to the registrar’s office and get the lien removed. This process usually takes between a week and ten days.
- Get Your CIBIL Score Updated
Your CIBIL score is one of the most important factors deciding your eligibility for almost all kinds of loan. It is even used to determine your home loan eligibility. Whenever you successfully pay back your home loan interest and principal, your CIBIL score improves. If you are prepaying your home loan, get your CIBIL score updated by your lender right after you make the payment. In the future, if you ever apply for another loan, updated and improved CIBIL score will be a real boon.
Get Other Documents in Order
After you prepay your home loan, make sure to obtain an encumbrance certificate and legal clearance certificate. An encumbrance certificate can be taken from the registrar’s office and will reflect the prepayment. To obtain a legal certificate, you will have to approach a lawyer.
Once you have followed this checklist carefully, you can proceed with your home loan foreclosure. Remember that prepayments are valuable mainly if made at the beginning of the loan tenure. To see how much home loan interest you have to pay, use an online home loan EMI calculator. If this amount is low and making a prepayment is difficult for you, stick to EMIs.