Housing credit is reported to have grown by 39% in 2018. As more and more people are inclined towards obtaining a home loan, adequate financial planning is required to ensure no excess burden on borrowers.
Provision for home loan closure before completion of the tenor is extended by all major financial institutions to help borrowers save on interest payment. On successful repayment of the entire loan amount, an NOC (No Objection Certificate) is issued by the lending institution as an acknowledgement.
What is NOC?
A No Objection Certificate is a legal document stating that a borrower has absolved his/her entire debt, and no money is due for repayment. It is acceptable as a valid proof of loan settlement throughout all major financial institutions in India.
Importance of a NOC letter can be explained as follows –
- Increases credibility as a borrower
NOC can be submitted as proof of complete settlement of all past loans availed by an individual. Documentation and submission of such proof help lenders identify credible borrowers having a minimised chance of defaulting on any credit availed. Loans are readily extended to such individuals.
Approval of new loans depends on CIBIL score of an individual also. NOC proving complete settlement of a previous loan enhances the current credit score, making it easier for individuals to avail a new loan. For approval of a new credit after foreclosure of a previous home loan, financial institutions verify CIBIL score of a potential borrower to establish their creditworthiness. Thus, credit score determines your home loan EMIs if any in the future.
- Showcases complete ownership of property
During purchase of a house through a home loan, a lender has mortgage lien on the property. In case of loan foreclosure before completion of tenor, lenders issue a No Objection Certificate in favour of a borrower stipulating negation of all rights of the financial institution extending a loan on the acquired property.
- Helps in selling of property
A property with an existing mortgage lien cannot be sold in the market. Possessing a NOC letter proving completely repayment of loan after foreclosure indicates no existing lien mark on the property. Hence, it can be sold in the market without any hassles. Thus, the sale of property is one of the main reasons why NOC document is needed in such situations.
- Eliminates legal repercussions
A No Objection Certificate preserves the financial interests of borrowers in an adverse situation. Any legal troubles can also be solved through the presentation of this certificate, such as in situations of lower CIBIL score or claims raised on defaulting grounds.
Consequently, understanding what is a home loan NOC and why should you get it is of crucial importance while opting for foreclosure.
Availing a new home loan from an NBFC is relatively hassle-free and can be done by submission of the following documents –
- All documents pertaining to the new property a borrower wishes to purchase. Sale deed, NOC, and possession certificate are major documents required for loan approval.
- KYC documents such as Aadhaar card, PAN card, Voter ID card, etc. of an applicant proving his/her identity.
- Proof of current address through KYC documents or utility bills.
- Passport-sized photographs of the borrower.
- Proof of income – for salaried individuals, salary slips for the past three months have to be submitted. For entrepreneurs, financial accounts of the existing business have to be furnished for the past year.
The housing sector is receiving a tremendous boost from the government through various central and state-sponsored schemes such as PMAY, DDA, NTR, HUDA housing scheme, etc. Such programmes have made it possible for middle-class individuals to own multiple houses in their name.
