A home loan is a popular form of credit in India. In addition to purchasing a built residential property, it can be used to purchase land for construction, home extension, and renovation purposes. These are secured loans in which the borrower is required to put the property in question as collateral to the financial institution.
The borrower is supposed to repay the loan in equated monthly instalments (EMIs) over a while. If the individual cannot repay the whole amount in the fixed tenure, the financial institution has the right to sell or auction the property kept as collateral. And if he does, the financial institution returns the property title to the borrower.
The document containing the undertaking of the property’s title is called a Memorandum for Deposit of Title Deed, and the borrower must know all details about it, including its cancellation process, to remain informed about their finances. Read on to find out what this memorandum is and how it can be cancelled.
First off, What is MODT in Home Loan?
So, what is MODT in home loan? A Memorandum for Deposit of Title Deed, popularly abbreviated as MODT, is an undertaking applicable to all kinds of home loan borrowers these days. It is an undertaking in which the borrower specifies that they are willingly depositing the title documents of their property to the financial institution in return for a home loan. Registration of these undertakings by the government is required for the loan agreement, and the government imposes a stamp duty for registering them.
Individuals submit this undertaking when they are taking the home loan and are required to cancel it when the term of the loan has ended. As a token that the undertaking is no longer valid, individuals will receive a ‘Deed of Receipt’ when the memorandum is cancelled. So, the borrower must make sure that their memorandum is being cancelled at the time of the home loan closure.
What is the meaning of Pre-Closing Home Loan?
Pre-Closing Home Loan refers to the situation when the borrower pays a lump sum amount rather than the monthly instalments. This way, the borrower ends up paying off their loan earlier than the tenure stated in the loan contract. For pre closing home loans, many lenders levy a pre-closure penalty on the borrower.
With Tata Capital, foreclosure charges are imposed on the borrower for pre closing home loans only if they terminate the loan prematurely using someone else’s fund. However, if the loan is terminated prematurely by the borrower using their funds, no foreclosure charges are levied.
What is a Home Loan Closure Procedure?
A borrower can proceed with their home loan closure procedure by following the below-mentioned steps –
Step 1: Make Sure That There Are No Pending Dues
The first step in the home loan closure procedure is to calculate and confirm that there are no pending dues left. For this, the borrower needs to compare the home loan statement. While comparing, individuals should make sure that they are keeping the home loan interest rates into consideration.
Do not forget to take the NOC from the institution, stating that you have no outstanding dues left before the closure of the loan plan.
Step 2: Get Your Records Updated
After clearing all dues, the borrower must ask the lender to update their credit history, the record of their debt repayment, and loan statements before the closure of the loan. This will make getting loans with a lower interest rate easy for the individual.
Step 3: Get a Non-Encumbrance Certificate
A non-encumbrance certificate is an all-in-one legal document containing your property transactions’ history. This certificate will testify to the loan statements and help with future loan applications.
Step 4: Get All Of Your Original Documents
During the home loan closure procedure, you must collect all the original documents, such as title deed, sales deed, power of attorney, etc., submitted to the lender during your loan application and make sure that none of the pages is missing. For this, you can prepare a list of all the documents that you submit at the time of loan application so that during the closure of the loan, you do not miss out on any document.
Step 5: Take Your Post-Dated Cheques Back From the Lender
Sometimes, borrowers give post-dated cheques to the lenders to avoid missing any EMIs and getting penalised. So, it is needed for the individual to make sure that they don’t have any post-dated cheques still left with the lender. Take it from them and destroy it so that anyone can’t use it for any purpose.
Step 6: Cancel your Memorandum for Deposit of Title Deed
Once the borrower has taken all the required documents, they should make sure their Memorandum for Deposit of Title Deed gets cancelled. They will have to take all the documents to the sub-registrar office.
Home Loan Closure Documents
Cancellation of the Memorandum for Deposit of Title Deed can be made either online or offline by the borrower. To cancel it, individuals should first ensure that they have all the required documents to complete the cancellation process hassle-free.
Following is a list of home loan closure documents required for the cancellation of the memorandum are:
- Original Memorandum for Deposit of Title Deed
- NOC certificate
- PAN card
- Aadhaar card
- ID proof of two witnesses
- Bank representative’s office ID
As necessary as it is to know how to take a home loan, as crucial is to know about its closure. A home loan can be closed either at the end of the loan tenure or even before maturity.
However, at both times, the borrower must get their Memorandum for Deposit of Title Deed cancelled by submitting all the required home loan closure documents. This is because the memorandum serves as the undertaking that specifies the borrower’s willingness to hand the property title to the lender at the time of seeking the home loan. And thus, it must be cancelled when you terminate the loan.
The document has a government stamp over it, and it is necessary to get it cancelled as soon as the debt repayment has been made. Or else the borrower will unknowingly put their asset or property at stake.