Guidelines to buy and sell a home on loan
A property can be leveraged for various reasons by buying, selling, transferring and so on. While selling, many people face a dilemma if they can actually sell a mortgaged property or if they have to settle the loan before selling their property or before transferring the property loan to the buyer. There are many instances in which a property buyer seeks funds from a bank and buys the property. In order to avoid further confusions about how to buy or sell a property against which a loan is outstanding, here are some steps to follow:
Organize all the property documents:
The first step a property seller should do is to get all the legal documents arranged. Documents such as the housing society share certificate and the sale/ purchase deed of the property should be updated and be valid. Having a sale deed denotes that the land is in the name of the seller and he has the right to sell it. In case the property was earlier sold by someone to the current owner, the future home buyer can demand for the copy of the previous deeds. Doing this will show the authenticity of the deal and the property.
Apart from just the sale deed, the buyer should also ask for the copies of stamp duty and registered house documents. In case the owner has taken a loan from the bank, the stamp duty registration documents will be with the bank and can be used for initiating a deal. Other documents such as the no-objection certificate from the housing society and document consent of a jointly owned property should be produced, depending on the type of property and the ownership.
In case the buyer buys the property with his own funds:
If a buyer buys a property with his own money, the procedure becomes a little easier. The seller should get a letter from the bank from which the loan is taken, which further states that the bank agrees to hand over the property documents once the complete payment is done. However, the buyer will have to pay the outstanding loan of the sellers housing loan account. The bank will henceforth release the property documents.
Acquiring the documents:
When the borrower pays of all the dues to the bank, he/she receives a ‘no dues’ certificate from the bank. Also the original documents which are kept with the bank are released over a period of 5 days after the money is received. Also the sale proceeds cannot be completely implemented until the time the person is servicing the housing loan. In case all the original document papers are with the bank and the buyer demands them to seek a loan, the mortgaged property cannot be sold. However, if the seller has paid a lump sum payment, he will not face any impact on the cost of acquisition. The interest which is paid on the loan can be claimed as deduction under the income.
If the buyer buys a property with a home loan:
If the buyer buys the home through the home loan, the seller will still have to settle his home loan. The property buyer will have to give the financial documents to the bank. However, the buyer will be granted loan once the bank is satisfied about his repayment capacity. It is advisable that the buyer seeks the home loan from the same bank which has given loan to the seller earlier.
Tax repercussions:
Although buying and selling a property is easy, it can cut down your actual profit down the years. The seller of the property will have short term capital gains tax. In case there is a home loan taken on the property, one has to keep in account about the interest which has been already paid earlier.
