Tips to buy and sell a home on loan

Is it possible to sell a mortgaged property? Do you need to settle the home loan first and then approach a buyer or can the buyer take over your loan? What if the buyer himself plans to take a loan to fund the purchase?

Here are some tips on how to buy or sell a home on loan:

Get all the property documents

Important documents that are required to sell a residential property are the housing society share certificate and the sale/purchase deed. Having a sale document deed ensures the ownership of the owner and his right to dispose the property. In case the property has changed hands more than once, the buyer can ask for the copy of the previous deeds to confirm the authenticity of the property and the deal.

The buyer can also ask for the copies of stamp duty and registered house documents. Since the property is mortgaged, the original documents will be with the bank and the buyer can use a photocopy of the documents to start a deal. Other documents such as the no objection certificate (NOC) can be demanded depending on the type of property and ownership.

In case a buyer pays with own money

In this case, the seller should obtain a letter from the bank where his property is mortgaged, stating that the bank has agreed to hand over the property after the complete payment of the loan. Then the buyer should pay the amount which is equal to the outstanding loan to the seller’s loan account. After this the bank will release the property documents.

When the borrower pays off all the dues, he will receive a ‘no dues’ letter from the bank. The original documents kept in the bank will be released in 5-10 working days after receiving the money.

In case a buyer seeks a home loan

The seller will be required to settle his home loans first. The buyer will have to produce all his financial documents at the bank and if the bank is satisfied with the buyer repayment capacity, he will be eligible for the new home loan. It is advisable that the buyer seeks home loan from the same bank where the property has been mortgaged because the bank will only have to just examine the buyer’s repayment eligibility.

Tax suggestions:

Selling a mortgaged property within a couple of years from purchasing can cut down the actual profit by half. If a buyer has taken a home loan on the property, he/she should consider the amount of interest paid before calculating the actual gains. Section 80C states that the principal of the loan can be claimed as tax deduction. If the property is sold within five years of the purchase, the tax deduction will be reversed.