Paying off your home loan is a significant milestone, but the journey doesn’t end there. The next crucial step is to cancel the Memorandum of Deposit of Title (MODT). This process removes the mortgage lien from your property records, ensuring that officials officially recognize your home as loan-free.
In this guide, we’ll explore everything about MODT cancellation charges, providing you with the knowledge you need to navigate this final phase of your home ownership journey smoothly.
MODT Cancellation Charges
A lender charges a “MODT Cancellation Charge” to a borrower who has fully repaid their home loan. This fee allows the lender to officially cancel the “Memorandum of Deposit of Title Deed” (MODT), a legal document they used as security for the loan.
Lenders typically charge between 0.2% and 0.5% of the total loan amount as a one-time fee to process the cancellation of the mortgage lien on the property. This fee allows borrowers to regain full ownership rights.
Suggested Read: MODT Charges for a Home Loan
Steps to Cancel the MODT
| Steps to Cancel the MODT | Details |
|---|---|
| 1. Obtain a No Objection Certificate (NOC) | Once the loan is fully repaid, request a NOC from the lender confirming no pending dues and consent to canceling the MODT. |
| 2. Prepare a Cancellation Deed | Draft a cancellation deed referring to the original MODT, stating loan repayment and lender’s consent to cancellation. |
| 3. Sign the Deed | Both borrower and lender (or authorized representatives) sign the deed in presence of at least two witnesses. |
| 4. Register the Cancellation Deed | Visit the local Sub-Registrar’s office, register the cancellation deed, and pay required registration fees. |
| 5. Collect Original Documents | After registration, ensure lender returns all original title deeds and collateral documents. |
Process of MODT Cancellation
Steps to Cancel the MODT: A Comprehensive Guide
- Close the Loan Account
The first step is to officially close your loan account, which includes:
Clearing the remaining home loan balance along with any applicable fees.
Obtaining a “No Due” certificate from the lender, which confirms that there are no outstanding amounts on the loan. - Retrieve Original Documents
Once the loan is closed, request the return of your original property documents. Lenders typically hold these under the MODT agreement. Ensure all documents, including the original MODT document, are returned in good condition, as they are essential for cancellation.
- Submit an Application for MODT Cancellation
Next, formally apply to cancel the MODT. This step generally involves:
– Submitting a written request to the lender for MODT cancellation.
– Providing the loan closure certificate and the original MODT document.
– Paying any applicable MODT cancellation charges. - Documentation and Verification
The lender will then verify the loan closure and ensure all necessary conditions for releasing the security interest are met. This step may require additional documents, such as proof of identity or property-related paperwork, to confirm ownership and property status.
- Execute the Deed of Cancellation
Upon successful verification, the lender will initiate legal formalities to release the security interest under the MODT. This includes preparing a Deed of Cancellation of Equitable Mortgage (or a similar document as per jurisdiction). Both borrower and lender must sign this deed.
- Register the Cancellation Deed
To legally nullify the MODT, the cancellation deed must be registered. This process includes:
– Submitting the signed cancellation deed to the local Sub- Registrar’s office or relevant authority.
– Paying applicable registration fees and stamp duty.
– Collecting the receipt and acknowledgment for the deed’s registration. - Update Property Records
Finally, check with local land records or property registration authorities to ensure that the property records reflect the cancellation of the MODT. This step is crucial for maintaining accurate ownership and title records.
Pros and Cons MODT
The MODT (Memorandum of Deposit of Title Deed) has its own set of advantages and disadvantages. While it simplifies loan processing, ensures legal clarity, and can offer better loan terms, it also brings additional costs, requires formal cancellation upon loan repayment, and may lead to legal complications if not handled correctly.
| Pros of MODT | Details |
|---|---|
| Streamlines Loan Processing | Enables quicker loan approvals by using property as collateral. |
| Legal Clarity and Security | Offers clear legal protection for both the borrower and the lender. |
| Improved Loan Terms | Strengthens the lender’s ability to recover dues in case of default, which may result in better loan conditions for the borrower. |
| Cons of MODT | Details |
|---|---|
| Additional Costs | Involves extra expenses such as stamp duty and registration fees. |
| Formal Cancellation Required | Demands a formal cancellation process after loan repayment, which can include further procedures and charges. |
| Legal Risks from Non-Compliance | Failure to follow MODT procedures could lead to legal issues. |
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Key Acts in India Governing MODT and Its Cancellation
- Transfer of Property Act, 1882
This act provides the legal foundation for the creation of mortgages, including equitable mortgages that are established through the deposit of title deeds. - Registration Act, 1908
It requires the registration of documents related to immovable property, such as MODTs, to ensure their legal validity and enforceability. - Indian Contract Act, 1872
The MODT agreement falls under this act, which outlines the general principles of contracts, including the obligations and rights of parties involved in the MODT. - Limitation Act, 1963
This act specifies the timeframes within which legal proceedings must be initiated for disputes involving property and contracts, including matters related to the cancellation of MODTs.
Suggested Read: Property Tax Online Payment
Additional Legal Provisions for MODT Cancellation
- No Objection Certificate (NOC)
A critical document for cancellation, the NOC issued by the lender certifies that the borrower has settled all dues, enabling the release of the property’s title deeds. - Stamp Duty and Registration Fees
These fees apply during both the creation and cancellation of the MODT. The amounts vary depending on the state regulations and the loan value. - Legal Documentation
Proper execution and registration of the cancellation deed are essential to formally nullify the MODT and remove the lender’s charge on the property.
Bank Wise MODT Cancellation Charges
Upon repaying a home loan, borrowers must cancel the MODT to remove the lender’s lien on the property. MODT cancellation charges vary by bank, depending on their policies.
These fees, which can vary between 0.2% and 0.5% of the total loan amount, are due from the borrower at the time of property registration or upon receiving the initial loan disbursement. The maximum charge is capped at Rs. 25,000, regardless of the total loan amount.
| Bank | MODT Cancellation Charges |
|---|---|
| State Bank of India (SBI) | 0.1% and 0.3% of the loan amount |
| HDFC Bank | Up to ₹10,000 |
| ICICI Bank | ₹5,000 – ₹7,500 |
| Axis Bank | ₹7,500 – ₹10,000 |
| Punjab National Bank (PNB) | Up to ₹5,000 |
Source: Bank Wise MODT Charges
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MODT Charges and Cancellation
When applying for a housing loan, it is vital to understand all associated fees, including MoD charges. These charges typically range between 0.2% and 0.5% of the loan amount, with a maximum cap of ₹25,000, regardless of the loan size. Borrowers are required to pay these charges either at the time of property registration or upon disbursement of the first loan installment.
- Mandatory Nature of MoD Charges
Payment of MoD charges is non-negotiable and is a prerequisite for loan disbursement. This requirement also extends to situations where the loan is being transferred to another individual or financial institution, as the MoD formalizes the lender’s security interest in the property. - Purpose of MoD
The MoD secures the lender’s right to repossess and auction the property in the event of a default, ensuring the recovery of outstanding dues. Compliance with MoD regulations is essential for obtaining an encumbrance certificate and finalizing loan transactions. - MoD Cancellation
After the home loan is fully repaid, canceling the MODT is crucial to reclaim full ownership of the property. This process involves obtaining a No Objection Certificate (NOC), drafting and registering a cancellation deed, and updating property records to reflect the removal of the lender’s charge. - Importance of Legal Guidance
Given the legal and procedural nuances of MoD cancellation, consulting a legal advisor or property expert is advisable. This ensures a smooth process, helps address jurisdiction-specific requirements, and safeguards your interests.
Completing the MODT cancellation not only signifies the end of your home loan but also restores your full, unencumbered ownership of the property, providing long-term peace of mind.
Conclusion
MOD cancellation charges process is the final phase that not only marks the end of your loan obligations but also solidifies your complete ownership rights. Taking the time to manage this process carefully will help you avoid any last-minute hurdles and allow you to fully enjoy the peace of mind that comes with true homeownership.
For further guidance or to get started with your home loan journey, visit Credit Dharma today and let us help you achieve your financial goals with confidence.
Frequently Asked Questions
The time required to cancel a MODT can vary depending on the bank and the complexity of your loan case. Generally, it can take a few weeks from the time you submit all necessary documents and make the required payments.
In most cases, you will need to visit the bank at least once to submit the necessary documents for MODT cancellation. However, some banks may offer online or remote options for initiating the process, so it’s best to check with your specific lender.
Documents typically required for MODT cancellation include a loan closure statement, payment confirmation receipt, MODT cancellation request letter, identity proof, and address proof. Ensure you have all documents ready to streamline the process.
Failing to cancel the MODT can lead to complications in the future, such as difficulties in selling the property or obtaining clear legal titles. It’s crucial to complete this step to avoid legal and financial issues related to property ownership.
The cancellation fee for a mortgage varies by lender and can include charges for the cancellation of the Memorandum of Deposit of Title Deed (MODT), which in India typically ranges from ₹1,000 to ₹10,000 depending on the bank.
For instance, the State Bank of India may charge 0.1% to 0.3% of the loan amount, while HDFC Bank could impose a fee up to ₹10,000. Additionally, if a loan is canceled after disbursement but before encashment, fees are limited to ₹1,500; if canceled post-encashment, prepayment conditions apply.
Borrowers must also obtain a No Objection Certificate (NOC) from the lender and prepare a mortgage cancellation deed, with MODT charges generally being non-refundable. It’s advisable to check with the specific lender for accurate details on cancellation fees.
No, MODT (Memorandum of Deposit of Title Deed) charges are not refundable. They are one-time fees paid by borrowers for the legal process of recording the mortgage and canceling the lien on the property after full loan repayment.
These charges, which typically range from 0.2% to 0.5% of the total loan amount, cover the costs associated with the legal documentation required to release the lender’s claim on the property.
Once paid, these charges are considered final and are not returned to the borrower under any circumstances.
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