When an individual applies for a home loan like Maidment property finance, the applicant must submit different documents related to the property and undersign certain forms. One such document is the Memorandum of Deposit (MoD).
When someone buys a property, the individual takes a considerable amount of home loan. With a home loan application, the applicant also needs to manage other related expenses, like processing fees, legal charges, etc. Setting aside all the charges, MoD is one of the charges most people do not heed.
This post talks about the Memorandum of Deposit in your home loan application and focuses on different aspects of the same.
MoD In Home Loan
MoD is a legal set of documents that the applicant signs at the time when he/she receives funds for the home loan to the account from the lender. The document specifically states that the lender has a portion of rights on the property until the debt is paid completely in the stipulated time frame.
Financial institutions like banks and NBFCs consider MoD as a safety measure for borrowers who get defaulters and cannot repay the loan. In default payment, the lender has the right to auction the property to recover the dues.
Usually, the MoD is prepared by the lending vendor, and the borrower needs to sign on it. The exchange of the said agreement happens after the disbursement of the first instalment from the lender or after the property registration.
Importance of MoD
MoD testify that the lender is the rightful owner of the property the borrower is buying. This also makes it clear that the person buying the property has availed the loan against the collateralized asset. All the encumbrance-certified copies are mentioned in the paperwork.
Once there is a complete settlement of the loan amount from the borrower’s end, the lender must cancel or invalidate the MoD. This way, the borrower legally alters the title of the property and becomes the sole owner of the said property.
Charges of MoD
All financial lending institutions need to have MoD before they release the final instalment of the loan amount to the seller. While the lender prepares the MoD, the borrower is responsible for bearing all the MoD charges for the home loan.
The charges usually vary between 0.2% to 0.5% of the overall loan amount. For example, the MoD charge for ICICI bank home loan stands at 0.25% and keeps changing. Though, the upper limit is usually set at Rs 25,000/-, no matter what is the type of property or the amount of the overall home loan.
Advantages of MoD Home Loan
MoD-based home loan is known for a wide range of benefits compared to loans with registered mortgages. The first and foremost benefit is that MoD home loan eliminates the possibility of fraud, that are very common these days related to the process of home loan.
Apart from this, the total amount to be paid for the stamp duty and other charges might get as low as 0.1% of the amount you will lend for the property. It is important to note that the rate of interest, along with other service charges,