There can be various reasons why one may want to sell a property while still mortgaged under a home loan. While on one hand, a person may find it difficult to pay the EMIs, on the other a person may even want to upgrade to a better property. The latter will help make enough capital to reinvest in another property.
How does one prepare to sell his mortgaged property?
When a person decides to sell his mortgaged property, he should ensure he has all the important documents- Sale Deed and housing society share certificate, etc. (depending on the type of property). A Sale Deed is required to confirm the ownership and the authority of the owner to sell the property. However, if the property has had previous ownerships, it is the buyer’s responsibility to demand for a copy of the previous deeds. Along with the sale deed, the buyer should also ask for copies of the stamp duty and other registered property documents. Naturally, if the property to be sold is mortgaged, it’s documents will be held by the bank as security. In such a case the buyer should ask for the photocopy of all those documents.
Methods of selling a mortgaged property
The method by which a person sells his mortgaged property depends largely on the buyer’s mode of payment.
If the buyer pays from his own savings
A home owner can sell his mortgaged property based on mutual agreement with the buyer and enter into an agreement for sale. The seller should present a letter from his bank stating the due amount that is to be paid for the release of his property documents. The buyer will then have to ensure that the equivalent amount is deposited in the seller’s home loan account by a given date. This date is set between the seller and his bank. Eventually, the home loan being settled, the bank releases the property documents and the seller can transfer the property to the buyer. If both the buyer’s and the seller’s banks are the same, they can save a lot of time.
If the buyer does not deposit the complete amount as per the given date, the seller will have to incur additional costs through premium besides the outstanding amount. This additional amount to be paid by the seller will be decided by the bank before finalizing the due date.
When the seller pays off the outstanding dues, an NOC is issued by the bank to certify that there are no outstanding home loan dues to be paid and the original documents are released.
If the buyer takes a home loan to buy the property
In case the buyer funds the purchase by seeking a home loan, it is important that the seller settles his home loan on the mortgaged property. The seller cannot transfer his home loan to the buyer and even in cases where both the buyer and the seller use the same bank; the bank will ask the seller to first close the previous loan before granting another home loan on the property. The buyer will be granted a home loan only after he submits the financial documents to the bank and after the bank has checked his repayment capacity.
As per legal experts, the sale of a property cannot be completed if a seller is servicing a housing loan since the buyer would want to see the original property documents that are held by the bank. Therefore the amount paid for the release of the documents from the bank should be a part of the property buying agreement.