Why is it important to take NOC after paying off your home loan?

Why is it important to take NOC after paying off your home loan?

For the average middle class man, the only way of fulfilling the dream of becoming a home owner is taking on a home loan. You can approach a bank of housing finance company to get your loan application approved. Whether you repay the loan as per the stipulated tenure or choose to prepay it before the tenure ends you must remember to take one important document from your lender upon loan completion – the NOC document. Yes, taking the NOC for home loan closure from your lender is incredibly vital. Let’s understand what it is and why it’s necessary.

What is NOC?

NOC stands for No Objection Certificate. It is a legal document that you get from your lender when you pay off your home loan in full. This includes the principal loan amount, the interest rates and EMIs as well as all outstanding dues. The lender issues this document containing important information such as your name, address of the property taken on loan (with you as the legal owner after loan repayment), and the loan account number. It also contains the details of the date of loan closure. The NOC from bank for home loan further certifies that the lender does not have any more legal rights on the property (serving as collateral during the loan tenure). It is essentially a certificate that states that the property rights are transferred to you.

NOC transference

Typically, lenders directly mail the NOC to the address listed in the loan application documents after the loan is completely repaid. However, it is better to check with the lender about the status of your NOC. In case you’ve moved to a different address, you can request to meet the lender in person and collect your NOC for home loan closure.

Importance of taking NOC after closing home loan

Your NOC is one of the many documents that provide future lenders an insight into your financial health. There are 2 main reasons why you need to get the NOC after having closed the home loan. They are as under:

It helps you get back all your important documents: While taking out a home loan, your lender generally asks you to provide a whole lot of your financial documents. These documents stay in the custody of your lender until the loan is repaid completely. Apart from the property taken on loan, you may sometimes need to take on additional loan amounts (in the form of top-up loans). In this case you may be asked to provide additional security (gold, other property documents etc., for instance). The NOC for home loan closure document can help you claim all the collateral and the associated documents provided to the lender.

To update your CIBIL report and improve your CIBIL score: All lenders ask you to provide credit scores irrespective of the type of loan you need. When you close your home loan, you must ask your lender to provide the NOC for home loan closure document. You need to submit this to CIBIL so that your credit history is correctly updated, reflecting that the loan is repaid in full. Updating your credit history is very crucial, especially if you intend to take another loan in future. The CIBIL report will show other lenders that you repaid your loan on time, making you a credit worthy candidate.

Final thoughts: Whether it is the NOC from bank for home loan or one from an HFC, you must remember to collect the NOC document in order to avoid discrepancies with the lender in future. If you don’t take the NOC you may be asked to repay some dues in future because of your ignorance or not being aware of the rules and regulations related to home loan.