The Significance of an Encumbrance Certificate in the Home Loan Journey

If you are planning to invest in a property, it is of utmost importance that you ensure that the property you are investing in is not mired in any kind of legal trouble and does not have any encumbrances or liens against it. The question is: how does one ensure this? A buyer can find all this information in the Encumbrance Certificate. 

What is the Encumbrance Certificate? The Encumbrance Certificate is a legal document that states whether the property has a lien or charge on it. Now, you must be wondering what is a lien or charge or encumbrance. When a borrower avails of a loan against a property, the lender they have applied to places a lien or encumbrance on the property. This lien essentially stops the borrower from selling the property until the borrower has repaid the loan in its entirety. After a borrower clears the loan, the lender removes the lien from the property and the borrower is then free to sell the property. The Encumbrance Certificate essentially helps a borrower figure out if a property has any financial or legal charge against it. 

If the property has no charges against it, it essentially means that the property has a free title and is therefore a safe buy. However, if the property has a charge against it, you must first talk to the property owner, have these charges removed and then invest in it. 

Property buyers can obtain the EC certificate from their sub-registrar's office. The EC can be obtained for 30 years. The EC certificate will not only ensure you are investing in a safe-to-buy property but it is also one of the documents that you will need to mandatorily submit to your lender while applying for a home loan or a loan against property. 

Borrowers must know that Encumbrance Certificates are of two types: Form 15 and Form 16. The sub-registrar's office releases Form 15 when a property has no encumbrances against it. On the other hand, if the property has a lien or a charge against it, your local sub-registrar's office will release Form 16. Please note that when you apply for an encumbrance certificate, you will be asked to mention the period for which you wish to check encumbrances on a property. Further, please note that you will also be required to pay a fee. This fee varies from state to state. 

If you need the Encumbrance Certificate, simply follow these steps: 

1. Go to your state's land registration website and choose the option to apply for an Encumbrance Certificate. 

2. Next, you will be prompted to share some information about yourself. Enter all the required fields and save the information entered. 

3. Next, enter the period for which you want the EC and then calculate the fee. 

4. Once this is done, you will be taken to the acknowledgement window. Take a printout of the acknowledgement receipt. 

5. An inspector will now inspect the property and collect all the required information for the period mentioned in your Encumbrance Certificate application. 

6. After completing their inspection and collecting all the required information, they will issue the Encumbrance Certificate. If no transactions happened during the period mentioned in the form, the concerned authority will release a Nil Encumbrance Certificate. 

The Encumbrance Certificate is an important document. If you are planning to buy a property, get the EC first and make sure that the property you have selected is a safe buy.