Everybody wants to have their dream house nowadays. With home loans facilitated by various financial institutions, they can now achieve their dreams instantly. Before searching for the best home loan among myriad choices, you must understand the documents related to housing loans and why MOD is primary and crucial among them. Being an essential document for the loan, the lender ensures that both of you are bounded by a legal agreement, and there will be no issues for the lender if anything goes out of hand as an assurance that the lender holds the share in your property, To dig into the core, let’s dive deep and understand what it is and when it gets cancelled.
Memorandum of Deposit (MOD) in Home Loan:
You must have seen that when you apply for a housing loan, you have to fill mod in a home loan, and for this, the lender requires you to provide numerous documents about your home and make specific commitments, such as the MOD.
Memorandum deed of your dwelling property is another name for the MOD, which stands for memorandum of deposit of title deeds. Let’s examine what MOD is and how it relates to mortgages.
Your Memorandum of Deposit of Title Deed is an agreement that states the reason and conditions for the loan. It must be signed for the home loan to be disbursed. It is an affirmation made by the borrower of a mortgage loan that the lender has possession of the property’s title deeds. It remains under the lender’s control until the final instalment of the loan is paid.
Why is MOD necessary?
One of the most significant fees you must pay when qualifying for a house loan is the Memorandum of Deposit (MOD). This mod in home loan is necessary to ensure that you have given the bank the title deed to your property as loan collateral.
The MOD now serves as a crucial part of legal proof that the lender owns the property. Moreover, it specifies that the borrower has taken out a loan for a property. The document is shown on every certificate of encumbrance.
At the end of the loan term, after the borrower has repaid the final instalment, the bank must declare the MOD void. It fully transfers property ownership to the buyers and its lawful proprietors. To accomplish this, the bank sends a representative to the registration office to draft a release deed. This request is to free the MOD and remove any encumbrances, which will be forwarded to the registration department. You can now thoroughly enjoy the sole possession of your investment for the rest of your life.
The MOD is implemented when the lender releases funds to the borrower. It is typically created by the lender and signed by them and you for the loan recipient. Depending on the terms of the home loan, it may be executed when the money begins to flow to the lender in instalments or when the property is registered. Until the loan is fully repaid, the MOD stipulates that the bank or lending institution is entitled to a portion of the property, such as apartments in Chennai. They use this as a security measure if the borrower doesn’t make their loan payments as agreed.
How is MOD cancelled?
Lenders must withdraw MODs and release properties from encumbrance if loans are fully repaid. For the registration office to release the MOD and remove the lien on the property, a representative of the lender will make a release deed there.
You have to ensure the property address is accurate, the lender has no claim on the property, and it states that all outstanding debts have been paid in full in the release document, and then they release the NOC.
Home Loan Processing Fee:
The processing fee is one of the most significant fees you must pay for a house loan. Lenders charge this one-time cost to execute your home loan application. You don’t pay this fee until your loan application has been approved. It is also known as an “administration fee” by some lenders.
A tiny portion of the loan is used to calculate the processing fee. The proportion could change between lenders. The processing charge in India typically amounts to 0.25
5 to 2% of the loan amount (plus GST), depending on the loan provider.
MOD Charges:
Recent modifications have been made to real estate regulations. As a result, before disbursing the last part of the loan to every financial institution, including banks and lending organizations, it will henceforth issue MOD. Even though the bank drafts and executes the home loan, the borrower is still liable for paying the MOD fees. MOD charges for a home loan could range from 0.1 per cent to 0.5 per cent of the total loan amount. Depending on the size of the loan or the type of residence, the charges can go up to 20.000 rupees.
Significance of MOD Home Loan:
The title deed can be obtained after the mortgage payment, and since the lender retains the ownership of the property, there is no need to go through any other form of the registration process. Additionally, it eliminates the chance of becoming a victim of mortgage fraud, which could ruin the experience of buying a property.
In case of default, your bank has the right to sell the property by auction. This minimizes any risk of loss to the bank. Moreover, it ensures that by paying instalments on time, you retain your possession of the property and can get the entire property rights by foreclosure of your housing loan.
Conclusion:
A Memorandum of Deposit ( MOD) is an essential and crucial document in a home loan. It binds the bank and the consumer in an agreement in which the bank is the lender, and the customer becomes the borrower. After full payment of the loan, it is closed by the lender, and a NOC ( No objection certificate) is passed. MOD charges for housing loans vary from a minimum of 0.1% to a maximum of 0.5%. The bank mainly signs it to show its name and possession of that housing property. So next time, before applying for the best home loan, keep MOD on your document checklist.
