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Home Loan Foreclosure – Do’s and Don’ts

  • Highlights

  • Do know the foreclosure charges

  • Get the original documents once the dues are paid

  • Don’t forget to obtain the no dues certificate

  • Inform credit information bureaus about foreclosure

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, and even more. While it’s essential to not default on EMIs to ensure a healthy credit score and avoid legal hassles, experts advise on using windfalls such as bonus or maturity of fixed deposits or insurance policies, towards foreclosure of the loan and be debt-free.

However, just as you need to understand the various aspects of procuring a home loan, its foreclosure involves nitty-gritties, knowing which would help to successfully foreclose the loan. Read to know what is the home loan foreclosure - do’s and don’ts.

Home Loan Foreclosure: Do’s

- Know the Foreclosure Charges

Home loans procured on fixed interest rates are subject to foreclosure charges. Hence, if you’ve availed a home loan on fixed rates, it’s essential to find out about foreclosure charges from your lender. These charges are added to the outstanding amount. Note that if you’ve taken a home loan on floating rates, you don’t need to pay any foreclosure charges.

- 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 is 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’s 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.

Benefits of Home Loan Foreclosure Calculator _ Bajaj Finserv _ HD

Home Loan Foreclosure: Don’ts

- Not Receiving No Objection/dues Certificate

Often after a loan foreclosure, borrowers don’t collect the no objection/dues certificate from the lender. This 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 in case you don’t receive it. On receiving the certificate ensure everything – the loan account number, details, foreclosure amount paid, date of foreclosure - are correct.

- Not Informing Credit Agencies about Foreclosure

Once a home loan is foreclosed, you must inform credit bureaus about it so that it’s updated in their records. It’s essential to do this, so that your credit score remains healthy and you are eligible for further big-ticket loans in the future.

Additional Read: Things to Consider Before Foreclosing Your Home Loan

Home loan foreclosure prior to its tenor helps you save on EMIs and address other essential financial goals.

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