When it comes to enjoying a good night’s sleep and a higher quality of life, nothing comes close to having your own home. However, thanks to the mounting prices of real estate, buying a home is often easier said than done. Fortunately, we now have some of the Best Home Loans in India to depend upon, while making this a significantly high-priced purchase!
That being said, what if you have taken a Home Loan, repaid the EMIs for a few years, but now wish to enjoy some financial freedom; how do you do away with the Loan?
Well, the answer is a Pre-Closure!
Yes, if you have the funds to pay off the remainder of your Principal Loan Amount, you can simply choose to pre-close your Home Loan.
Let us take a closer look at the important aspects of Home Loan Pre-Closure, to help you make the right call.
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When you plan to pay off your Home Loan, in part or full, before the completion of the agreed tenure, the process is known as pre-closure.
You have the requisite funds, and therefore wish to save your interest outgo
You wish to get your Home Loan refinanced to enjoy a better Home Loan interest rate.
As per the guidelines laid down by the Reserve Bank of India, banks cannot charge any prepayment penalty on Floating Rate Home Loans. However, if you have a Fixed Rate Home Loan, and wish to pre-pay the same, you can expect a prepayment penalty amounting anywhere between 0.5 and 5% of the outstanding loan amount.
Since banks earn interest on loans, they want you to pay it off in the longest time possible, preferably over the course of the loan tenure. If you wish to pre-close your home loan, the bank loses out on the interest and therefore will try its best to discourage you from doing so. Pre-Payment Penalty is something that may make you rethink about your decision of loan pre-payment. Yet another hurdle in the process is the clause by the bank that asks you to physically visit the branch for foreclosing your loan before the end of the tenure. However, if you have weighed the pros and cons of pre-closing a Home Loan, and still wish to go ahead with your decision, here is the best way to close your loan.
You can do so via email, or by contacting your relationship manager, and convey your intention of paying off your Home Loan. At this point, you may be required to visit the bank to place your request physically. In some cases, the bank may also ask you to fill a Home Loan Prepayment Application Form.
When you apply for Home Loan prepayment, you should carry along the following documents to go seamlessly through the process –
As discussed earlier, banks often levy a penalty ranging from 0.5% to 5% of the outstanding loan amount, when you choose to prepay. You must get in touch with your bank to know the exact amount of penalty charged by the bank. This will help you stay prepared with the requisite funds.
When you visit the bank to pre-close your Home Loan, in addition to the documents mentioned above, you must also carry a Cheque, or a Demand Draft to pay off the outstanding loan amount along with prepayment penalty.
Once you submit the cheque or the demand draft, the bank will issue an Acknowledgement Letter stating the receipt of the funds. This letter should be duly signed and stamped by the bank. You must take this letter home, and keep it safe with you.
In this case, the list of documents which you were required to submit at the time of making the Home Loan application can come in handy. Once the Home Loan is paid off in full, then the bank will send across your loan agreement within a span of a few days. In addition, you must alsoretrieve the following documents from the bank –
We hope that you are now aware of the best way to pre-close your Home Loan in India. So, what are you waiting for? If you have ample funds and wish to enjoy financial freedom like never before, take the right steps of prepaying your home loan today!
Also Read: 3 Ways to Prepay Your Home Loan
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