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What are Home Loan Pre-Closure Charges?Home Loan Preclosure Fees of Banks Steps to Preclose Home Loan Types of Home Loan Closures FAQs

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Home Blog Home Loan Home Loan Pre-Closure Charges

Demystifying Home Loan Pre-Closure Charges

Updated : November 7, 2023

Author : manu

Home Loan

3894 views

What are Home Loan Pre-Closure Charges?Home Loan Preclosure Fees of Banks Steps to Preclose Home Loan Types of Home Loan Closures FAQs

Pre-closure charges might seem like a daunting obstacle on your road to financial freedom. In this blog, we'll demystify "Home Loan Pre-Closure Charges" to equip you with the knowledge you need. Learn how you can save money, shed your financial burden, and work toward being a debt-free homeowner. Keep reading to take control of your financial future.

What are Home Loan Pre-Closure Charges?

Preclosure of a home loan before the scheduled term may seem like an attractive option, and it can be pursued for various reasons, including refinancing or interest savings. It often occurs when a borrower decides to switch their housing loan to a different bank, primarily because the new bank offers a more favourable interest rate compared to the current lender.

In this scenario, the borrower initiates the process by applying for a home loan with the desired bank. Upon approval, the new bank pays off the existing loan in its entirety, enabling the borrower to avail a loan with a lower interest rate, which can lead to substantial savings in the long run.

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Another motivation for pre-closing a housing loan is to reduce the overall interest paid. By settling the loan ahead of schedule, borrowers can avoid paying a portion of the interest that would have been due had they continued with the original tenure.

However, it's crucial to take into account the home loan pre-closure charges imposed by the bank. The decision to pre-close a home loan should be weighed against the home loan prepayment charge associated with it. In some cases, the home loan foreclosure charges can surpass the amount saved by paying off the loan early, making it financially impractical.

Banks often discourage borrowers from preclosure of home loans because it results in the bank receiving less interest than if the borrower had adhered to the full loan tenure. Consequently, banks or lenders typically levy a home loan early repayment fee to compensate for the lost interest revenue.

If you're considering pre-closing your home loan to save money, you should also explore other financial advantages such as Home Loans with EMI Waivers offered by some lenders.

Home Loan Preclosure Fees of Banks

Bank	Preclosure charges	Prepayment charges
HDFC LTD	Nil	Nil
Dhanlaxmi Bank	Nil	As per the terms of the bank
LIC Housing Finance Limited	Nil to 2% of the prepaid loan amount	Nil to 2% of the prepaid loan amount
Tamilnad Mercantile Bank	Nil	Nil
IDBI Bank	Nil	Nil
PNB Housing Finance Limited	Nil
Dena Bank	Nil	Nil
Jammu & Kashmir Bank	Nil	Nil

India Shelter Finance Corporation	Nil	Nil
State Bank of India	Nil	Nil
South Indian Bank	Nil	Nil
Yes Bank	Nil	Nil
Canara Bank	Nil	Nil
Oriental Bank of Commerce	Nil	Nil
Federal Bank	Nil to 3% of the outstanding balance	Nil to 3% of the outstanding balance
Bank of Maharashtra	Nil	Nil
Central Bank of India	Nil	Nil
Karur Vysya Bank	Nil	Nil
Andhra Bank	Nil	Nil
Reliance Home Finance Limited	2% to 5% of the outstanding principal	2% to 5% of the outstanding principal
TATA Capital	Nil - When paid off using own funds	Nil - When paid off using own funds
Bank of India	Nil	Nil
Axis Bank	Nil	Nil
Gruh Finance Limited	Nil	Nil
AAVAS Financiers Limited	Nil	Nil
Bank of Baroda	Nil	Nil
DBS Bank	Nil	Nil
Indian Overseas Bank	Nil	Nil
Sundaram Home Finance Limited	Nil	Nil
Kotak Mahindra Bank	Nil	Nil
Aditya Birla Housing Finance Limited		Nil
Indiabulls	Nil	Nil

Steps to Preclose Home Loan

To initiate the pre-closure process of your home loan, follow these steps:

Write a Formal Letter: Begin by composing a detailed letter addressed to your bank. In this letter, communicate your intention to preclosure, and request the necessary procedures and documents.

Request Official Documents: Emphasise the return of all official documents related to your housing loan, such as property papers and loan agreements.

Obtain a No Objection Certificate (NOC): The bank should provide you with an NOC, confirming that there are no outstanding dues or liabilities on your part. This certificate is essential for the legal release of your property from the mortgage.

Second NOC for Mutual Agreement: Secure another NOC from the bank, indicating a mutual agreement between both parties—the bank and you, the borrower—regarding the preclosure and the repayment terms.

Settle Outstanding Dues: Clear any remaining dues, as per the agreed-upon terms, and obtain the necessary receipts and records.

Receive Property Documents: Ensure the bank hands over all original property documents to you, signifying the completion of the preclosure process.

By following these steps diligently, you can successfully preclosure your home loan and gain full ownership of your property.

Learn more about exclusive benefits like Home Loan for Women in India that cater to the specific financial needs of women homeowners.

Types of Home Loan Closures

There are several types of home loan closures:

Preclosure: This involves paying the entire outstanding loan amount before the intended loan tenure concludes.

Regular closure: The loan is closed upon completion of the originally agreed-upon tenure.

Bad loan closure: In certain situations, if a borrower struggles to make loan payments, the bank may consider waiving off fees. However, collateral may be at risk, and guarantors may be held accountable in most cases.

Settled loan closure: When a borrower cannot repay the full loan amount, the lender may offer a discounted rate to settle the overdue portion, and the remaining balance is forgiven.

While pre-closing your home loan is an excellent way to save on interest costs, there are also alternative financing options available to homeowners. One such option is exploring Pre-Approved Home Loans in India.

We've equipped you with the necessary information regarding "Home Loan Pre-Closure Charges," Now you can assess your loan situation, estimate potential savings and get in touch with your lender to discuss pre-closure procedures. However, if you're worried about potential challenges, know that NoBroker Home Loan Services is here to support you. With our expertise in streamlining complex tasks, we can help you achieve stress-free financial management.

FAQs

FAQ 1: What are home loan closure charges?

Answer: Home loan closure charges, also known as pre-closure charges, are fees levied by lenders when borrowers pay off their home loan before the originally agreed-upon tenure ends.

FAQ 2: Does SBI impose any pre-closure charges on home loans?

Answer: No, State Bank of India (SBI) does not impose any SBI home loan pre closure charges on home loans.

FAQ 3: Are there HDFC home loan pre-closure charges?

Answer: If you are an individual borrower, there are no prepayment or foreclosure charges when opting for HDFC home loan prepayment or foreclosure. However, for non-individual borrowers (such as companies, sole proprietorship firms/concerns, or HUF as co-applicants), charges do apply.

FAQ 4: Can I pre-close my home loan without incurring any charges?

Answer: In most cases, you can pre-close your home loan without charges if your lender does not have a pre-closure fee policy.

FAQ 5: Is there a difference between pre-closure charges and prepayment charges?

Answer: Pre-closure charges are incurred when you pay off the entire outstanding loan amount before the tenure ends. Prepayment charges may refer to partial payments made during the loan tenure, which can attract different fees.

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manu,Author

Manu is an ardent admirer of literature who weaves the magic of words to spark transformations. Combining her love for literature with an intrigue for actionable wisdom, she embarks on an extraordinary journey into the realm of real estate. Through her captivating writing, she aspires to empower and inspire, leaving an indelible mark of hope and purpose in the lives of readers.

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