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What Encumbrance Certificate is and Why Do You Need it for a Home Loan?

by Ramesh Kumar
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Choosing and purchasing the right property needs a lot of research. One needs to find out the right lender, evaluate the property’s affordability and undergo a lot of paperwork. One of the most essential documents required for a home loan application is the encumbrance certificate.

Lenders need this certificate mandatorily to assess whether the property’s possession of ownership is genuine. Also, it confirms if the concerned property is free from legal or economic encumbrances.

What is an encumbrance certificate?

The word “encumbrance” means any non-financial or financial claims made on a property by parties other than the property’s title holder. It is an essential document that is used as a piece of evidence for the free possession of property.


For a successful home loan application process, or while selling or purchasing any property, this certificate is required. Usually, when any property is caught in a legal dispute, the municipal body will issue an encumbrance certificate

As this certificate is provided for a specific timeframe, it gives out a list of all the registered transactions that took place related to the property. Whether the ownership of property has been transferred many times, loans have been taken against it, or any legal claims have been made in the past, an encumbrance certificate provides complete details.

As it can track the property record of up to a period of 30 years, one can get the details of the property within this timeframe, and not more than that.

Why is an encumbrance certificate needed for a home loan?

Purchasing a house is a major investment, and this is why an encumbrance certificate is a major requirement in the real estate sector. In order to protect one’s legal rights over the property and avoid fraudulence, property buyers must present this certificate.

With the help of this certificate, property can be duly verified and it also details different associated loans with this property. Thus, lenders need this certificate to assess a borrower’s eligibility for a home loan.

Apart from these, there are some other reasons as well that describe why an encumbrance certificate is needed for a home loan. Here are some:

  • It helps investors in determining the property in question for generating a lien for a mortgage, lease rights, third-party rights, and other charges.
  • It assures the property buyer that the concerned property is free from all financial and non-financial liabilities like liens, leases, and existing debts on the property.
  • This certificate is provided to the Panchayat/Village Officer for updating land tax records. This is done only if the concerned land or property tax has not been paid for more than three years.
  • This certificate is submitted at the time of mutation of property. 
  • While withdrawing money from the property’s PF account, an encumbrance certificate is required.

Thus, an encumbrance certificate can also help borrowers in availing tax benefits for a home loan.

How to apply for a repo rate linked home loan?

When a borrower decides to link his/her interest rate for a home loan to the current repo rates of RBI, the interest rate is linked to a benchmark external to the lender. This is a repo rate linked home loan.

To apply for a home loan online, follow the steps provided hereunder:

Step 1: Go to the official website of the lender and navigate to the home loan application form page.

Step 2: Fill in the application form using the applicant’s full name, mobile number, income details, employment type, PIN code, and the required loan amount.

Step 3: Submit all the relevant documents required like income proof, age proof, encumbrance certificate, etc.

Step 4: After doing so, enter the OTP requested.

Step 5: Now, proceed to complete the rest of the application process.

Once the duly filled application form is submitted, one of the lender’s representatives will come in contact with the applicant for further verification and loan approval process.

Things to keep in mind during home loan application process

Applying for a home loan can provide multiple tax benefits. In order to make the loan application process easier and seamless, one needs to keep in mind the following things:

  • Before opting for a home loan, the applicant must calculate their payable EMI as per their expenses and credit repayments. They can quickly calculate their home loan EMI amount using the home loan EMI calculator.
  • Ensure to check CIBIL score online and maintain a good repayment record for faster loan approval.
  • Make sure that the concerned property or land has environmental clearances and is also free from encumbrances.
  • Consider opting for an extended home loan tenor. This will gradually lower an applicant’s EMI payable and burden on monthly finances. 
  • Try to increase the applicant’s eligibility for the home loan to get it approved sooner. 

Besides, leading financial institutions extend pre-approved offers to existing customers. Such offers are applicable on financial products, such as home loans, loan against property, etc. These customised offers ease the application process besides making it hassle-free and straightforward. Existing borrowers can check their pre-approved offers online by entering their name names and contact details. 

Thus, an encumbrance certificate is not only beneficial for prospective property buyers but is also helpful for existing property owners. For quick and easy processing of loan, current owner needs to provide this certificate along with other mandatory documents to their lending institution. 

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