Meenakshi Taheem
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In the journey of home loan management, understanding the nuances of the Memorandum of Deposit of Title (MODT or MoD) is crucial for homeowners. The MODT is a legal document that borrowers submit to lenders, pledging their property as security for the loan. It signifies the borrower’s consent to create a security interest in favor of the lender. However, upon full repayment of the loan, homeowners often face the procedural labyrinth of canceling the MODT to regain clear title to their property. This blog elucidates a step-by-step guide on how to cancel your MODT, ensuring a smooth transition back to full ownership.
Table of Contents
A Memorandum of Deposit of Title Deed (MODT) is a legal document executed when a borrower deposits the title deeds of their property with a lender as collateral for a loan. This process, known as creating an equitable mortgage, grants the lender a security interest in the property, allowing them to sell it to recover the loan amount in case of default.
Upon full repayment of the loan, the MODT must be canceled to release the lender’s charge on the property. This cancellation process may involve certain charges, which can vary depending on the lender and jurisdiction. For instance, some banks in India charge fees ranging from ₹1,000 to ₹10,000 for MODT cancellation.
Advantages |
Disadvantages |
Facilitates quick loan processing by using property as collateral. |
Involves additional costs such as stamp duty and registration fees. |
Provides legal clarity and security for both borrower and lender. |
Requires formal cancellation after loan repayment, which may involve additional procedures and charges. |
Ensures the lender’s right to recover dues in case of default, potentially leading to better loan terms for the borrower. |
Non-compliance with MODT procedures can lead to legal complications. |
The first step in the process is ensuring that your loan account is officially closed. This involves:
Upon loan closure, request the return of your original property documents. Lenders typically hold these documents as part of the MODT agreement. Ensure that all documents are accounted for and in good condition. This set should include the original MODT document, which is crucial for the cancellation process.
The next step involves formally applying for the cancellation of the MODT. This process may vary slightly depending on your jurisdiction and the lender’s policies but generally includes:
After receiving your application, the lender will verify the loan closure and ensure that all conditions for releasing the security interest have been met. This verification process may require additional documentation, such as identity proof or property-related documents, to confirm the ownership and status of the property.
Suggested read: Home Loan Tenure
Upon successful verification, the lender will proceed with the legal formalities to release the security interest created under the MODT. This involves preparing a Deed of Cancellation of Equitable Mortgage or a similar document, depending on the legal framework in your jurisdiction. The lender and the borrower must duly sign this deed.
The final step in the cancellation process is the registration of the cancellation deed. This step is critical as it legally nullifies the MODT, removing the lender’s security interest in the property. You will need to:
After the registration of the cancellation deed, it’s advisable to check and ensure that the property records are updated to reflect the cancellation of the mortgage. This may involve liaising with local land records or property registration authorities.
When applying for a housing loan, understanding all associated fees is crucial, including Memorandum of Deposit (MoD) charges. These charges, ranging from 0.2% to 0.5% of the loan amount, are payable by the borrower upon property registration or receipt of the first loan installment, with a cap of Rs. 25,000 regardless of the loan size.
Paying MoD charges is mandatory; borrowers cannot avoid this fee. This also applies when transferring the loan to another individual or lender; an MoD is essential for the transfer process. The MoD secures the lender’s right to repossess and auction the property in case of default, ensuring recovery of losses. Compliance with these regulations is necessary for the disbursement of the final loan amount by any financial institution, as noted in encumbrance certificates.
Suggested read: Moratorium Period in Home Loan
Canceling a MODT is a critical step in reclaiming full ownership of your property after the repayment of a home loan. While the process may seem daunting, understanding each step and preparing the necessary documentation can make it manageable. It’s also wise to consult with a legal advisor or property expert to navigate any complexities or legal nuances specific to your situation. Completing the MODT cancellation process not only marks the culmination of your home loan journey but also restores your unencumbered ownership of your property, offering peace of mind and security for the future.
Upon fully repaying a home loan, borrowers must cancel the Memorandum of Deposit of Title Deed (MODT) to lift the lender’s lien on the property. This cancellation process often incurs charges that vary across banks. Below is an overview of MODT cancellation charges for some major Indian banks:
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 |
Note: These charges are indicative and may vary based on factors such as loan amount and specific bank policies. It is advisable to reach out to the lender directly for the most updated information.
The borrower is responsible for initiating the cancellation of the Memorandum of Deposit of Title (MODT) after the complete repayment of the home loan.
No, MODT charges are not refundable. They are one-time fees paid for the legal process of recording the mortgage.
The borrower typically pays the MODT cancellation charges, as it involves removing the lien from the property title after loan repayment.
MOD cancellation in a home loan refers to the legal process of removing the mortgage lien recorded under the Memorandum of Deposit of Title, signifying that the loan against the property has been fully repaid.
MOD stands for Memorandum of Deposit of Title. It’s a legal document indicating that the property title has been deposited with the lender as security for the home loan.
MODT charges are fees associated with the Memorandum of Deposit of Title, paid to the registrar or relevant legal body. These charges cover the cost of legally recording the mortgage of the property as security for the loan and vary between 0.2% to 0.5% of the loan amount, subject to a maximum cap, often Rs. 25,000.
Published on 20th February 2024
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