Is It Mandatory To Do MOD When You Take Home Loan

The term MOD means Memorandum of deposit of title deed or popularly also known as Mortgage deed of your property. This deed is usually executed when the bank releases money to the vendor from the loan account of its customer in installments or at the time of registration of the property.

This document is usually signed between the banker & the borrower to has availed the loan. With completing the MOD formalities, the bank ensures that their name is a part of the house or the property they have given loan. In case the borrower defaults in the future, this deed helps the banker take possession of the property.

With the recent regulations almost all the banks and financial institutions have made it mandatory to execute the MOD at the disbursement of the last installment of the loan amount.

Now, usually the charges for doing an MOD is borne by the borrower and ranges from 0.1% to 0.5% of the loan amount, not exceeding Rs 25,000 irrespective of the loan amount

The MOD for banks has been brought as a process to create a valid proof of  ownership and the lien on the property for the bank from the borrower

Since the MOD is a registered document, it will reflect in all the encumbrance certificates.

How will the MOD be cancelled once the loan is paid in full ?

When the borrower pays the entire outstanding principle with interest, the bank will have to cancel the MOD and free the property to the borrower. At this time, the respective bank managers will go the registration offices respectively and make an release deed, confirming to the registration department to release the MOD and clear the encumbrances.