Home Loan Foreclosure: Meaning, Charges and Procedure

Many people dream of getting a home loan, and once approved, they repay the EMI for the duration of the loan. However, if they have an excess of income, they may wish to repay the home loan in full to avoid paying excess interest in EMIs, a process known as home loan foreclosure. An applicant can foreclose the loan in its entirety before the term of the home loan expires, and doing so will help save a significant amount of money in interest on the remaining principal amount.

The following is the process for foreclosing on a home loan:

Step 1: Visit your lenders branch.

Step 2: Speak with a customer service representative and request a home loan foreclosure form.

Step 3: Complete the home loan foreclosure form with the necessary information and return it to the lender.

Step 4: The lender will review and approve your foreclosure application for a home loan.

Step 5: Confirm the loan balance amount that must be paid.

Step 6: Select your preferred payment method and pay the outstanding balance by cheque, NEFT, IMPS, RTGS, or any other method.

Step 7: After you have paid the outstanding amount, the lender will issue a No Objections Due Certificate (NOC) and close your home loan account. 

Step 8: Once you have repaid the home loan amount, you must remove the lien from your property because it prevents you from selling your home and allows you to claim ownership.

Step 9: If you submitted post-dated cheques, you must retrieve them from the lender.

Step 10: Obtain an Encumbrance Certificate (EC), which will help state that your property is free of all monetary and legal liabilities.

Step 11: Retrieve all of the original documents that you submitted when applying for a home loan.

Step 12: Finally, you can proceed to update your credit report because repaying a home loan will have a positive impact on your credit report.  

The fees for a home loan foreclosure vary by lender, but they are usually minimal, ranging between 2% and 3% of the loan amount. You can use a home loan foreclosure calculator to figure out how to foreclose on your home loan.