All set to take up a home loan after due diligence and caparison of multiple quotes on interest rates and EMIs? Have you thought of comparing the miscellaneous and other lesser-known charges while comparing various home loan offers available to you? Many home loan borrowers often end up skipping these details. Prospective loan seekers many a time just use the interest rate as the basic yardstick to compare various home loan deals.
A home loan has many other components that can dent you financially and the selection of a loan should be done only after an active comparison of all such costs. Apart from an EMI, there are some other hidden charges such as Loan processing fee, Administrative fee, Document charges, Late payment charges, Legal fees, Technical inspection fees, etc. which the bank will levy on you for the home loan.
Here is one such charge you need to be aware of before taking up a home loan.
Memorandum for the deposit of title deed or MODT is applicable for all home loan borrowers. It is essentially an undertaking given by you that you are depositing the title documents of the property with the bank at your own free will in return for a loan. For some banks, apart from the loan agreement, the undertaking needs to be registered and the government levies a stamp duty towards registration charges. Stamp duty charges vary from one state to the other, but on an average, charges of 0.1 percent to 0.2 percent of the home loan amount apply.
A MODT is a part of the State Government requirements and has to be registered in addition to the loan agreement and has to be registered at the Sub-Registrar Office.
It is mandatory in a few states, but not in all states.
The pledged property is endorsed at the Sub-Registrar office.
All You Need to Know About MODT Charges
E-filing of notice of intimation in case of mortgage by way of deposit of title deed came into effect on April 1, 2013. E-filing means the online or electronic filing of notices of intimation of mortgage of the property specified in Section 89B of the Registration Act, 1908.
These amendments have been carried out in order to safeguard the interests of banks and society. Earlier, the agreement/intimation relating to mortgage by the way of deposit of title deed was out of the public domain.
Due to this, there was scope for fraudulent practices like availing loans from multiple banks on the same property or disposing of the property which is already mortgaged. Therefore, these amendments have been brought with the objective of preventing such frauds.
In case of mortgage by way of deposit of title deed done on April 1, 2013, and after:
- If an agreement is executed or signed between the mortgagor and the mortgagee, it has to be compulsorily registered. The usual time limit for registration is four months from the date of execution.
- If such an agreement is not executed, then the mortgagor has to file a notice of intimation of such a mortgage. This notice should be filed within 30 days from the date of the mortgage.
- When an agreement is executed and registered according to clause (1), then filing of the notice of intimation is not required.
- The non-registration of agreement / non-filing of notice of intimation may defeat the legality of the mortgage and cause injury to the interests of parties involved. Any person who fails to file such notice within the prescribed time limit shall be liable for punishment under section 89C of the Act.
Procedure for the Registration of Agreement
The agreement may be registered with the sub-registrar’s office where the mortgaged property is situated. The procedure for the registration is the same as for the other documents.
How to Cancel the MODT once the debts are cleared?
Typically, it’s the duty of the bank or Housing Finance Company to cancel the MODT (Memorandum of Deposit of Title Deed) after the closure of the Home Loan. But most banks (mortgagee) in India thrust the duty onto the borrowers (mortgagor). So, when collecting documents from the bank after the settlement of your loan, do not take the MODT. Instead, insist on the bank to cancel the MODT and give you a “Deed of Receipt” executed by the mortgagee in favor of the mortgagor. However, if they do end up pushing it onto you, below are the guidelines on how to do the MODT Cancellation.
The documents required are:
- Original MODT
- NOC certificate
- Bank representative (Mortgagee – Executant) Office ID
- Aadhaar Card
- Authorization Letter from the bank that the bank representative is the authorized person for executing the cancellation of MODT (if applicable)
- PAN & Aadhar of Borrowers (Mortgagors – Claimant)
- ID (preferably Aadhaar) for 2 Witnesses
Benefits of MODT
- The stamp duty and other fees are as low as 0.1% of the home loan amount. In the case of registered mortgages, the cost is comparatively higher.
- The title deed can be easily secured after making the payments.
- No registration process is required when the property is handed over to you.
Some Frequently Asked Questions
What is the time limit for the filing of notice?
The notice should be filed within 30 days from the date of the mortgage.
Can the time limit be extended in exceptional cases or otherwise?
No. As it is a legal provision and not an administrative order, the time limit cannot be extended.
What is the process of filing?
For the convenience of citizens, the department has introduced an online e-filing system that is presently available to banks/non-banking financial institutes; citizens can file the notice online from the banks. The details regarding the process are available on the portal of the Department of Registration and Stamps.
Apart from the e-filing, as a temporary arrangement, citizens can file the notice physically. The format of notice is enclosed herewith.
Where the notice has to be filed?
The notice has to be filed with sub-registrar office in whose jurisdiction the property (of which the title deeds are deposited) is situated.
Whether the days are fixed for physical filing?
The designated offices can accept the notice for filing during working hours on any working day.
About Stamp Duty
Stamp duty is a state levy paid to register a document, typically an agreement or transaction paper between two or more parties, with the registrar. Usually, it is a fixed amount depending on the nature of the document or is charged at a certain percentage of the agreement value stated in the document. Stamp duty is not uniform across states and varies for different types of documents.
How to pay the stamp duty, filing charges, and the document handling charges?
In the case of e-filing: Stamp duty and filing charges has to be paid online through the Government Receipt Accounting System (GRAS)
In case of physical filing: Stamp duty and filing charges can be paid through any permissible mode, including the GRAS. If the filing fee has to be paid through DD, then it should be in favor of the respective sub-registrar office and payable in the respective City. Document handling charges have to be paid in cash.
What is the actual process of physical filing? What other documents are required?
- Get the notice prepared in the prescribed format
- Pay the proper stamp duty
- Affix the photographs and put the signature(s) thumb impression(s) of the mortgagor(s)
- Verify it with the bank (a designated officer at the bank has to provide his signature and seal)
- Mortgagor(s) has to submit it to the sub-registrar along with a photocopy of the notice
- If stamp duty as per Article 6 is paid on another document and Rs100/- is paid on the notice, then the attested true copy of the other document has to be submitted along with the notice
- Sub-registrar, after verifying stamp duty, shall pass receipt of the filing fee and document handling charges and shall give acknowledgment on the photocopy of the notice.
If the title deeds of multiple properties are deposited, then where should the notice be filed?
- If all properties are situated within the same jurisdiction, then a single notice containing information of all properties and their title deeds is sufficient.
- If the properties are situated within the different jurisdictions, then separate notices have to be filed with every sub-registrar under whose jurisdiction the property (of which the title deeds are deposited) is situated. For such notices, the filing fees and document handling charges have to be paid separately.
Now that you know all about the hidden MODT Charge that the bank will levy on you for a home loan, it is important to make a thorough comparison in terms of interest rates, processing fees, prepayment charges, repayment flexibility and choose the home-loan option that is best suited to your needs.