An EMI of over 40% of your monthly income is never desirable, it hampers smooth budgeting and your financial planning for a secure future. Pay off your home loan as quickly as your capacity will allow, and consult your loan officer for every charge associated with the repayment. Remember and remind your existing lender that RBI had disallowed foreclosure penalties on home loans. Outstanding home loan calls for monthly EMI. In case a person receives a lumpsum amount, he can choose to foreclose a home loan to be debt free. Follow the procedures:
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.
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).
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. Original documents such as property title deeds, BBA and related documents will be returned to you within 2-3 weeks.
No dues certificate
Along with original papers, the customer needs to receive a no-dues certificate from the bank stating that no amount is payable. The certifi cate must include address of the property and customer name.
Things 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.
Rushing into foreclosure may not be the right answer, but other capital-pampered options are more dangerous considering rotting banking systems in many democracies including India. Take a long, hard look at all pointers and ensure that your decision is made optimally, seeking freedom from finance jerks. You may also try reducing loan repayment burdens with smarter options by moving your Home Loan outstanding balances to another Bank.