What Happens If You Sell Your House Before Paying Off Your Loan?
Planning to sell your house but have an outstanding loan to pay? Here's what happens if you are selling your mortgaged property and the list of documents required to sell the property.
If you are selling property before paying off your loan amount, you need to produce following documents-
- Mother deed
- Sale deed
- Documents of home loan sanctioning
- Society NOC
- Encumbrance Certificate
- Property Tax receipts, if any
- Housing society share certificate
Here are few ways through which you can find your way out for selling property without paying off your loan-
Buyer takes loan from the seller's lender
If the buyer takes a loan from the same lender, all of three parties- the buyer, lender and seller enter into the tripartite agreement. The lender will take into account the loan eligibility of the buyer, if approved, the amount required to settle the loan of the seller is taken care of and residual amount is handed over to the seller. The processing fee is incurred by the buyer.
Buyer takes loan from different lender
If the buyer already has a pre-approved loan from another lender, the seller needs to request bank for loan outstanding certificate along with the list of property documents maintained by the bank. If the loan gets approved, buyer's bank can issue outstanding loan amount for seller's bank. Once the loan amount is settled, the seller's lender will hand over the property document to buyer's bank. Once the documents are received, the remaining loan amount is disbursed.
Buyer is paying for the property from his own savings
It is a simple process as the seller can ask his lender to provide loan outstanding certificate. In return, a buyer can pay the down payment directly to seller's loan account. Once the amount is cleared, the bank will hand over the documents. Once the documents are received, the seller needs to transfer the property to buyer's name. The leftover amount is to be settled between buyer and the seller alone.
Checklist for buyers buying property with outstanding loan
- Check terms and conditions on which the seller had taken the loan, in case you are opting for the same lender. Usually, new loans are offered with more benefits and lower rates.
- Rate of interest may greatly vary as marginal cost of funds-based lending are linked with current market scenario whereas fixed cost of interest offered by bank is comparatively higher.
- Check if the loan was part of any scheme prevalent and if the benefit can be passed on to you.