MODT Cancellation Process and Charges Post Home Loan Repayment

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

• Memorandum for Deposit of Title Deed
• MODT Cancellation Charge
• Ways to Cancel the MODT
• Advantages and Disadvantages of MODT
• Process of MODT Cancellation
• MODT Charges
• Acts in India Related to MODT and its Cancellation
• Legal Provisions Related to the Cancellation of a MODT
• Bank Wise MODT Cancellation Charges

What is a Memorandum for Deposit of Title Deed (MODT)?

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.

MODT Cancellation Charge

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.

Ways to Cancel the MODT

1. Obtain a No Objection Certificate (NOC): After repaying the loan in full, request an NOC from the lender stating no outstanding dues and no objection to canceling the MODT.
2. Draft a Cancellation Deed: Prepare a cancellation deed referencing the original MODT, indicating the loan has been repaid and the lender consents to cancel the mortgage.
3. Execute the Deed: Both borrower and lender (or their authorized representatives) must sign the cancellation deed in the presence of two witnesses.
4. Register the Cancellation Deed: Submit the signed deed to the local Sub-Registrar’s office for registration, paying any applicable fees.
5. Retrieve Original Documents: After registration, ensure the lender returns the original title deeds and any other documents held as collateral.

Advantages and Disadvantages of MODT

 

Process of MODT Cancellation

Step 1: Loan Account Closure

The first step in the process is ensuring that your loan account is officially closed. This involves:

• Paying off the remaining balance of your home loan, including any applicable fees or charges.
• Obtaining a loan closure or “No Due” certificate from your lender, confirming that there are no outstanding amounts on your loan account.

Step 2: Collecting Your Original Documents

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.

Step 3: Application for MODT Cancellation

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:

• Submitting a written application to the lender requesting the cancellation of the MODT.
• Provide a copy of the loan closure certificate along with the original MODT document.
• Paying MODT cancellation charges, if any.

Step 4: Documentation and Verification

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

Step 5: Release of Security Interest

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.

Step 6: Registration of Cancellation 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:

• Submit the duly signed cancellation deed to the Sub-Registrar’s office or the appropriate government authority where your property is located.
• Pay the requisite registration fees and stamp duty, if applicable.
• Collect the receipt and acknowledgment for the registration of the cancellation deed.

Step 7: Update in Property Records

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.

MODT Charges

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.

Acts in India Related to MODT and its Cancellation

1. Transfer of Property Act, 1882: Governs the creation of mortgages, including equitable mortgages through the deposit of title deeds.
2. Registration Act, 1908: Mandates the registration of documents affecting immovable property, including MODTs, to ensure legal validity.
3. Indian Contract Act, 1872: Provides the legal framework for contracts, under which MODT agreements are executed.
4. Limitation Act, 1963: Specifies the time limits for initiating legal actions related to property and contract disputes, including those involving MODT cancellation.

Other Legal Provisions Related to the Cancellation of a MODT

1. No Objection Certificate (NOC): Essential for cancellation, the NOC from the lender confirms that the borrower has cleared all dues, allowing for the release of the property’s title deeds.
2. Stamp Duty and Registration Fees: Applicable during both the execution and cancellation of the MODT, varying by state and loan amount.
3. Legal Documentation: Proper execution and registration of cancellation deeds are crucial to legally nullify the MODT and remove the lender’s charge on the property.

Bank Wise MODT Cancellation Charges

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:

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.

FAQs About MODT Cancellation Process and Charges