The days of saving for years to renovate a dream home are long gone. You may now build, improve and renovate your home without waiting for your savings to amass. Thanks to the readily available home improvement loans! You can begin by determining the loan payment amount that best suits your financial situation.

Applying for home improvement loans requires a set of essential documents, including a nil Encumbrance Certificate (EC). Confused about what an Encumbrance Certificate is? We have got you covered.

This article outlines how to apply for an EC and the importance of an Encumbrance Certificate while applying for an improvement loan.

What is an Encumbrance Certificate?

Know what is encumbrance certificate meaning is an essential record that serves as proof of a property's unrestricted ownership or possession.

If a specific property is free of monetary and legal controversy, the Encumbrance Certificate aids in the resolution of any lawsuits. The certificate demonstrates a history of recorded transactions going back up to 30 years. It also suggests a chain of succession modifications and, if applicable, details regarding fraud and legal proceedings.

Types of Encumbrance Certificates

The Self-Regulatory Organisation (SRO) produces Encumbrance Certificate as either Form 15 or Form 16. 

Form 15: The SRO publishes an encumbrance on Form 15 if a property is the subject of an agreement involving an inheritance, sale, buying, lease, mortgage, giving as gifts, relinquishment, or division of the asset.

Form 16: In cases where a property has not recorded any financial transactions or encumbrances throughout the time span for which a certificate has been requested. A Nil-Encumbrance Certificate, or Form 16, is another name for it.

Why Is an Encumbrance Certificate Important in Securing Home Improvement Loans?

You can carry out any repairs or renovations to your current home with the help of a home improvement loan. It is a form of home loan that enables both significant and minor home renovations. An Encumbrance Certificate is important in this process as follows:

1. Significant documents required while applying for home improvement loans consist of identity proof, income tax return, estimated cost of construction, a No-Encumbrance Certificate, plan and layout of the planned house and a money receipt from the sub-registrar.
2. An Encumbrance Certificate declares you to be the legal owner of the property. Banks require you to submit it for legal verification as a mandatory pre-requisite for accepting your home improvement loan application.
3. Home improvement loans can involve huge financial funding. Hence, banks ask for an Encumbrance Certificate to confirm that your property to be renovated has no financial or non-financial liabilities. This may include unpaid debts, leases or mortgages.
4. While applying for home improvement loans, an EC shows that the concerned house is entirely owned by the individual and is not connected to any other bank with the intent of receiving a loan.

How to Get an Encumbrance Certificate?

The sub-registrar's department where the property was registered is where the EC for a property is available. To confirm the activities that have been made in relation to a property:

• An application for an EC must be submitted to the registration office with an attested copy of address documentation, details about the property, its title details, and the fee for the certificate.
• The officer will search the Databases for data from the given time period.
• A Nil Encumbrance Certificate (NEC), or an Encumbrance Certificate with no information, is issued if there have been no transactions within the specified period.
• The certifications are given out 15 to 30 days after the application date.

Fees for Obtaining an Encumbrance Certificate

The minimal fees for obtaining an Encumbrance Certificate vary from state to state. The cost of the EC could be between Rs 200 and Rs 500. Additionally, it may change based on the period during which the applicant has been looking for detailed information.

Conclusion

A Nil Encumbrance Certificate implies no charges are placed against the property during the stated time frame. If you plan to apply for home improvement loans, ensure your Encumbrance Certificate is in place.

While different states follow their own set of rules, you can apply either online or offline for the EC for a hassle-free sanction. A few states, including Tamil Nadu and Uttar Pradesh, have made the procedure of obtaining an Encumbrance Certificate computerised.