Home loans from financial institutions help you address one of the most crucial life goals – buying your dream home. However, these loans are long-term commitments that entail paying regular EMIs for over 15-20 years or even more. While it’s essential to not default on EMIs to ensure a healthy credit score and avoid legal hassles, experts advise using windfalls such as bonus or maturity of fixed deposits or insurance policies towards foreclosure of the loan and get debt-free.
However, just as you need to understand the various aspects of procuring a home loan, its foreclosure involves nitty-gritties, which would help to foreclose the loan successfully. Read to know what are the dos and don’ts of home loan foreclosure.
Dos of home loan foreclosure
Know the foreclosure charges
Home loans procured on fixed interest rates are subject to foreclosure charges. Hence, if you’ve taken a home loan on fixed rates, it’s essential to find out about foreclosure charges which will be added to the outstanding amount. Note that foreclosure charges are not valid on a home loan taken on floating rates.
Write to your lender about foreclosure
For home loan foreclosure, write an application to your lender. Your application must contain the loan account number, copy of PAN and address proof. Once the lender receives your application, the outstanding amount will be calculated and communicated. This amount needs to be paid either through cheque or online transfer (RTGS/NEFT).
Get the original documents
Once your lender receives the foreclosure dues, it is your right to receive the original documents of the collateral pledged. If you’ve pledged any property as collateral, make sure the title deeds and others received are in good condition.
Don’ts of home loan foreclosures
Not receiving no objection/dues certificate
After a loan foreclosure, borrowers often forget to collect the no objection/dues certificate, which can spell trouble later. Always collect the no dues certificate from your lender. Though most lenders send it via post within 15-30 days after foreclosure, you must follow up with your lender if you did not receive it. Once you receive the certificate, ensure everything is correct, like the loan account number, details, foreclosure amount paid, foreclosure date, etc.
Not informing credit agencies about foreclosure
Once you foreclose a home loan, it is advisable to inform the credit bureaus to update the records. It is essential to do this so that your credit score remains healthy and you are eligible for other big-ticket loans in the future.
Additional Read: Things to consider before foreclosing your Home Loan
Foreclosing your home loan before the tenor ends will help you save on your EMIs, also address other crucial financial goals.
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