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A power of attorney for a home loan is a legal document allowing a borrower to authorise someone to act on their behalf. It ensures that loan processes continue if the original applicant is absent. Whether you are an elderly citizen unable to physically visit your bank or an NRI living abroad, a power of attorney helps legally fill in for you. The individual appointed in the PoA can sign documents, negotiate terms, handle disbursement and more on behalf of the borrower.
PoAs are typically for home loans. However, the terms vary from lender to lender. For example, a power of attorney for an SBI home loan will have different clauses than an HDFC home loan power of attorney.
This guide provides an in-depth look at everything related to PoA. Explore its various types, common examples, application process and more in this comprehensive blog.
How Does A Power of Attorney Work?
A Power of Attorney (PoA) for a mortgage loan involves a principal (grantor or donor) who authorises an attorney-in-fact (grantee or donee) to act on their behalf. In cases of incapacity, it allows the chosen representative to make binding decisions when the principal is unavailable or unable to exercise sound judgment. However, the principal retains the sole authority to revoke or modify the PoA at any time. Additionally, a PoA for a home loan becomes invalid if the attorney-in-fact resigns, passes away, or the principal withdraws their authorisation.
The Powers of Attorney Act of 1882 governs the legal framework for PoAs in India. The specific powers granted under each PoA are clearly defined within the document. While the act does not mandate registration in most cases, it is required for PoAs dealing with immovable property transactions valued at Rs. 100 crores or more.
Who Can Be Chosen as The Power of Attorney?
An attorney-in-fact must be:
- An Indian citizen and resident.
- 18 years of age or above.
- A legal resident for a minimum of 181 days of a financial year
- Mentally sound for relevant decision-making.
You must note that a principal may appoint more than one attorney-in-fact. However, all chosen representatives must satisfy the above requirements, with the PoA clearly stating the division of powers and responsibilities.
Types of Power of Attorney for Home Loan
PoAs can be of multiple kinds depending on the level, duration and circumstances of authority delegated. Some common types include:
Durable PoA
A Durable Power of Attorney (DPA) is valid for a lifetime. It is preferred for cases where the principal is expected to be incapacitated due to illness, disability, or other reasons. Under a DPA, the attorney-in-fact can continue to handle home loan matters, make EMI payments, and make other decisions.
Springing PoA
A Springing Power of Attorney (SPA) is a conditional power of attorney (PoA) that only becomes effective when the specified conditions, such as being out of the country or deployed for military service, are met. Springing PoAs are suitable for principals who wish to retain control of their mortgages while seeking a backup for emergencies.
Medical PoA
A Medical PoA (MPA) allows the chosen representative to make healthcare-related decisions for the principal when they cannot do so. This includes consenting to or refusing medical treatments, selecting healthcare providers, and making end-of-life care decisions, as specified in the document.
General Power of Attorney (GPA) v/s Special Power of Attorney (SPA)
A General Power of Attorney grants authority broadly and extensively. It allows the attorney-in-fact to manage multiple aspects of the principal’s affairs, such as financial transactions, legal matters and business dealings. It is typically used when the principal cannot manage their affairs for an extended period. However, the GPA does not transfer ownership and is not legally valid for selling immovable property in India.
A Special Power of Attorney, on the other hand, grants powers only for specific tasks at hand. Once the task is completed, the SPA automatically expires. Since SPAs help retain greater control, they are the most commonly used power of attorney in home loans. For instance, an NRI might issue an SPA to a friend or lawyer just to sign a property’s sale deed on their behalf.
Understanding the distinction between the two ensures responsible authority delegation and necessary risk minimisation.
How Does Power of Attorney Function in Home Loans?
Banks typically do not extend a home loan in the name of the attorney-in-fact. However, homeowners can apply through the appointed attorney. Non-resident Indians (NRIs) and Persons of Indian Origin (PIOs) often utilise these ways to apply for home loans in India. Take a look at some broad criteria for NRIs/PIOs to execute a power of attorney in India-
- The appointed attorney must be a resident of India.
- The PoA must be executed on a non-judicial stamp paper of appropriate value in the concerned state and notarised.
- A passport-size photograph of the attorney, attested by the executor and maker of the PoA, must be provided.
- A notary public or judicial magistrate must attest signatures of PoA makers/executants.
- The executor/maker must sign every page of the PoA.
How Do You Get A Power of Attorney for a Home Loan?
Applicants seeking to execute a power of attorney for a mortgage loan can follow these steps:
Choose a Suitable PoA
Based on your circumstances, choose whether you wish for a General PoA or a Special PoA. You can also choose from Durable PoA, Springing PoA and Medical PoA.
Draft the PoA Document
After choosing the suitable type of PoA, one must draft a legally sound document with the help of a trusted lawyer. The draft must explicitly define the powers extended to the appointed attorney.
Notarise the Document
The next step is to legally validate the document by having it notarised by a public notary. The notary will verify the principal and attorney-in-fact and supervise the signing.
PoA Registration
Get the PoA registered with the local sub-registrar’s office if required. In the case of an NRI application, a PoA might require attestation of the Indian Consulate in the resident country before registration.
Submit to the Bank
The document can be submitted to the lender after successful notarising and registration. After verification, the lender will approve the attorney’s authority to act on the principal’s behalf.
Documents Required For a Power of Attorney
While preparing a PoA, the following documents may be required at different stages:
- Draft PoA.
- ID proofs of both parties (Aadhar Card, PAN, Driver’s License, etc.)
- Address proofs from both parties (Utility bills, Aadhar Card, voter ID, etc.)
- Attestation of Indian Consulate for NRIs
- Passport-size photographs of both parties
Typical Scenarios When A PoA Might Be Useful for Home Loans
Take a look at some real-life scenarios where using a power of attorney can help continue the loan process even during one’s absence:
- An HDFC Customer Moving Abroad
A working professional moving to a new country can issue a power of attorney for an HDFC home loan in their sibling’s name. The attorney-in-fact will comfortably manage disbursement, registration and other processes when they principal is gone.
- PoA by a Senior Citizen
An elderly home loan borrower who is unable to pay the loan regularly can issue a PoA in their daughter’s name. The daughter can handle paperwork, negotiations, and other formalities.
- PoA for Home Loan During Medical Treatment
A home loan borrower undergoing a planned knee surgery can issue a PoA in their brother’s name. This allows the attorney-in-fact to act on their behalf, eliminating the need for the borrower to visit the lender for documentation or loan approvals.
- PoA for a Military Personal on Active Duty
A military person posted in a remote or high-security area can issue a PoA in their spouse’s name. This enables the spouse to handle bank formalities without the officer’s presence.
- PoA to Manage Multiple Properties
A real estate investor with multiple property investments can issue a PoA in the name of a trusted business associate. This allows the investor to focus on business expansion while the attorney-in-fact handles bank formalities.
Conclusion
The power of attorney for home loans offers a practical solution to logistical, geographical and medical constraints. It creates a proxy-like situation where borrowers enjoy the flexibility to define the scope and the duration of authority granted. Different PoAs can be drafted as per varying circumstances. These include the GPA, SPA and others. However, the effectiveness of a power of attorney for a mortgage loan lies in careful selection, proper documentation and clear delegation of authority.
