Normally, a home loan is not just a financial product but often acts as a partner in one of the longest walks in an individual’s life. Month in and month out, the borrowers carry the burden of repayments of EMIs, having just one dream: complete ownership of their home. One of the critical steps in this journey is understanding the documents to be collected from bank after loan closure.

Ironically, however, the relationship with the bank does not end with the last payment. The lender will continue to cast its shadow on your property and credit history unless and until you complete the home loan closure procedure.

The closure process is basically the last handshake between a borrower and the lender for the loan process for any luxury apartment or home loan. The activity that guarantees all dues have been settled and all documents returned. In other words, it is where your burden transforms into freedom. Thus, an understanding of this process and the documentation involved will determine when you can truly say that your home is free from debt.

What is Home Loan Closure?

For a home loan closure, also called foreclosure or closure of repayment, it means that you have officially paid back all amounts borrowed with applicable interest and closed the loan contract with the bank or financial institution.

Documents to be collected from bank after loan closure contract involves more than just paying off the last installment; it requires a certain amount of effort from the borrower in getting legal clearances, returning pledged documents, and ensuring that their credit history actually reflects the proper last payment.

See also: Loan Against PPF: Can You Fund a Home Purchase With It? Here’s the Truth

Why Is the Home Loan Closure Process Important?

Some benefits your loan would receive from an appropriate home loan closure procedure are:

• Clear Ownership—The property becomes yours fully, with no right given to any financial institution.
  
• Credit Score Update—The closure reflects on your credit report and improves your profile on future borrowings.
  
• Safe Keeping of Papers—It provides immediate access to the important property papers pledged with the bank or with your lender as collateral. These documents to be collected from bank after loan closure should be carefully collected and stored.
  
• Avoiding Legal Hassles—Proper documentation would help a lot to avert future complications with the lender.
  
• Peace of Mind—A formal closure puts in place that no undisclosed dues or charges are still pending.
  

See also: Effective Ways to Reduce Home Loan Interest Rates and Save Lakhs

Home Loan Closing Process: Step by Step

Documents to Be Collected from Bank After loan closure process requires a lot of processes to be followed in terms of time and documentation. This is the list of usual steps:

Verify Outstanding Balance

Before commencing with closure, liaise with the lending institution for a final repayment statement. The statement reflects the outstanding principle, interest to date, and prepayment charges, if applicable. Make sure you have cleared all dues towards this statement.

Make Final Payment

After confirmation of all final amounts, the payment should be made by a cheque via electronic transfer or in any specific mode prescribed by the bank. Retain the receipt safely.

Obtain No-Objection Certificate/NOC

Request the NOC after all payments have been completed. The NOC states the lender has no more claims over the property. This is one of the most important legal home loan closure documents.

Getting Original Documents Back and Release of Collateral

All property documents and other collateral were submitted when the loan was sanctioned. After closure, these documents to be collected from bank after loan closure ought to be collected from the bank. Take great care when checking all documents to ascertain if everything is intact and nothing is missing.

Obtain Loan Closure Letter

Request a home loan closure letter for the documents to Be collected from bank after loan closure from the lender. The letter serves as proof of the closure of the loan account with the bank, free of any balance.

Informing CRAs

Most of the time, financial institutions inform credit bureaus about closure. To ensure that your loan account is credited under “Closed”, it is advisable that you follow up with CIBIL or check your actual credit report after 30-45 days.

Update Property Records (If Applicable)

If there exists any lien or hypothecation with respect to the property with the government authorities, then the application for cessation of lien has to be made at the registrar’s office in order to make the records of property reflect paper ownership.

See also: First Time Home buyer Loan Benefits, Tips and Advice

Five Key Documents To Be Collected from Bank After Loan Closure

The finalization of the home loan closure process unhindered will require the identification and collection of critical documents to be collected from bank after loan closure. These are documents that are proof of the legal right of repayment and ownership of property.

No Objection Certificate (NOC)

• This is issued by the bank when the amount due has been paid back.

• The borrower has paid off all dues, after which nothing is payable to the lender against the property.

• It is advisable to keep the same for future legal or financial requirements.

Closure Letter

• A letter from the lender stating the closure of the home loan account. The home loan closure letter would contain the loan account number and closure date and will contain a disclaimer stating that no dues remain outstanding.

• It is very important to keep this for future loan applications and credit history.

Final Repayment Statement

• It is a detailed document stating the amount for final repayment.

• It is obvious from all calculations about interest and principal.

• To assure that nothing is kept in disguise or nothing is pending over and above this.

Release of Collateral / Original Property Papers

• It consists of the property title deed, sale agreement, registration papers, and other original documents submitted during loan sanction.

• These loan closing documents are needed to resell, transfer, or refinance property.

• The collateral release document certifies that the lender has relinquished any claim.

Original Loan Agreement

• This is the primary contract signed with the lender that is returned upon the closure of the loan.

• Useful in case of any future dispute on repayment or loan-related issues.

• This also acts as a reference document relating to the understanding of your past obligations.

Common Mistakes to Avoid During Loan Closure

Mistakes happen with borrowers who are not there in the first place. At later stages, this becomes complicated. The most common mistakes are:

• Not Collecting Everything—All pledged documents to be collected from bank after loan closure must be returned.
  
• Ignoring NOC—One may prove to be difficult without this certificate to show loan is closed.
  
• Not Updating CIBIL—Always check once the loan is closed.
  
• Overlook Charges—Clear out all outstanding processing fees or penalties to avoid any disputes.
  
• Losing Closure Documents—It must be kept safe and stored in physical and preferably digital form.
  

See also: Home Loan Sanction Letter: Format, Validity & Key Things to Know

Benefits of Closing a Home Loan

Paying off and closing the loan gives you diversified benefits, as follows:

• Enhanced Financial Freedom – No EMIs mean more disposable income.
  
• Borrowing Ability – Eligibility is better for future loans.
  
• Emotional Security—The best satisfaction comes from locking up a home that one acquires at the end of paying off all debts.
  

Final Words for Documents to Be Collected from Bank After Loan Closure

A home loan closing is as vital as applying for loans and repaying them. It is not just about the payment of dues. There are vital documents to be collected from bank after loan closure, like the No Objection Certificate, home loan closure letter, Final Repayment Statement, Release of Collateral, and Original Loan Agreement and preserve them.

Closing the loan properly makes your property free of encumbrances, gives you legal rights, and adds to your financial credibility. You could then own your house completely without any tension by going through a stringent process of avoiding common mistakes.

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