What is MOD in a Home Loan?

MOD or MoD stands for Memorandum of Deposit in a home loan. It is a fee that needs to be paid to the lender along with your property’s title deed to get a home loan. In short, signing the MOD lets the lender share the ownership of the property till you have repaid your home loan amount in full. 

Understanding MOD Charges in Home Loans

Loans have numerous charges associated with them, the most popular being the processing charges. Home Loans also have a MOD charge, which is a significant amount of the loan and is mandatory by law. Let’s look at some important factors related to the Memorandum of Deposit -

• It is signed by both the lender and the borrower

• It needs to be paid before the last installment of the home loan is paid to the borrower

• It is in addition to the processing charges of the loan

• It gives legal rights to the lender to take possession or sell your property in case you default on the loan

• It may include documentation and administrative fees related to creating and maintaining the MOD

• It may also include the processing charges related to the legal aspects of registering and releasing the MOD

How are MOD Charges Calculated?

Signing the MOD safeguards the lender in case you, as a borrower, default on the loan. They can take ownership of the property or sell it to make up for their loss. Here are some important factors related to the calculation of MOD charges -

• The charges range from 0.1% to 0.5% of the loan amount. 

• The charges cannot exceed Rs.25,000 regardless of the loan amount you borrow.

• It is a one-time payment and not recurring like your EMI.

• It is non-refundable. 

• Once your loan is approved, you submit your property title deeds, and make the process formal by signing the MOD.

How to Cancel MOD?

MOD charges are not refundable. Once you have paid it, you will not get the amount back on paying off the loan. Once you have paid off the loan, it is the responsibility of the lender to cancel the MOD and give up rights to the property. 

Sometimes, you might need to cancel the MOD by yourself. You can get a No Objection Certificate after paying off all your dues. You will then become the sole owner of the property; the bank or lender will not have any possession rights on the property.

You can cancel the MOD both online and offline. You can take the deed receipt and NOC from your lender and then visit the Sub-Registrar’s office to get the MOD removed. You might have to pay a nominal fee of Rs.200 for the procedure. 

Conclusion

The MOD in banking is a very relevant document that safeguards both the lender and the borrower. They are particularly useful in case of home loans. 

On one hand, the lender gets a security as once the MOD is signed, they can sell or auction the property if the borrower defaults on his loan. The borrower has the security of the procedure under law, they know that their property is safe till they pay the EMIs on time. Once the loan is paid off, the lender cancels it. 

You can also apply for home loans up to Rs.3 Crore through the Moneyview app, starting from just 8.50% p.a. To apply for a home loan from our partner lenders, visit our website or download the Moneyview app.