An outstanding home loan calls for monthly EMI. In case a person receives a lump sum amount, he can choose to foreclose the existing home loan to be financially debt free. To foreclose a home loan, you must follow the procedure detailed below.
Application
First, write an application to the finance company/bank for foreclosure of loan. Existing home loan account number, copy of PAN and copy of address proof may be enclosed with the application.
Payment
Once the application is received, the bank will calculate the amount outstanding after taking into account the interest paid so far and the date of foreclosure. The amount payable shall be communicated. This amount needs to be paid by way of cheque or online transfer (NEFT/RTGS).
Foreclosure charges
No pre-payment penalty can be levied on foreclosure of floating rate loans. Some charges on fixed rate loans may be levied. These charges will have to be added while making the foreclosure payment.
Receipt of documents
On receipt of outstanding dues, the bank will complete the foreclosure formalities. EMI instructions will be stopped forthwith. Original documents such as property title deeds and related documents will be returned to the customer within 10 -15 working days.
No dues certificate
Along with original papers, the customer needs to receive a no-dues certifi cate from the bank stating that no amount is payable. The certifi cate must include address of the property and customer name.
Points to note
1. Refer to the document checklist to check if all the documents were received in good condition.
2. Inform credit rating agencies about the foreclosure so it is updated in records.
(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
