Financing your home on loan is a commonly used method of owning a property. Also, you know that home loans are long term commitments. However, you may want to sell off the property much before the loan comes to an end due to any reason.
However, with a loan on the home, you may be confused about proceeding further with questions like the following clouding your thoughts. Will the bank lay down any penalties? Will the buyer be able to take over the loan? What about the originals documents held by the bank?
We tell you more about how do you need to proceed if you plan to sell your property with a home loan.
Before you Proceed With the Sale
As you have a loan on your property, all important documents would be deposited with the bank. Hence you would need to produce to the prospective buyer the Xerox copies of your Sale Deed /Title Deed, Encumbrance Certificate, Loan documents, Property Tax receipts, Electricity Bills, Housing Society Membership details, etc. to prove your ownership.
If the buyer is interested in going ahead, you would need to inform your lender about your intention to carry out a sale of this property. The lender would then issue you a letter of the outstanding loan, which also acts towards your ownership of the property.
After Finalisation Of Sale
After verifying all the documents, if the buyer decides to go ahead with buying your property, then you would need to clear off the loan to get the original documents of the property. The loan could be closed by the own funds of the buyer or through a loan raised by him /her.
Settlement through Buyer’s own funds
This is the best case scenario. You can mutually decide a schedule of payment for this transaction. The buyer can pay you a down payment equivalent to a certain percentage of the decided value of the home. You can further pay this amount to your lender, post which the lender can release your documents. The release of these documents may take around ten working days.
Once you get the documents, you can go ahead with formalising the act of sale by registering a sale deed and transfer of documents to the buyer.
Settlement of the Property through a Loan.
If the buyer decides to pay for your property through a loan, there could be two scenarios possible.
Avail a Loan with the Same Lender as Yours
If the buyer decides to go in for a loan with your lender, the process is quite smoother as the lender has already carried out due diligence of your property. It would just need to carry out the verification process of the buyer of the property. Once the lender is satisfied with the repayment capacity of the buyer, a tripartite agreement is created between the lender, the buyer and you.
A part of the loan approved for the buyer is transferred to your loan account to close it and the rest of the amount is transferred to the new loan account of the buyer. However, the buyer would need to pay all regular processing changes on loan.
Avail a Loan with a Different Lender
If the buyer decides to go in for a loan from a different lender, you would need to submit copies of all important documents and the outstanding liability certificate from your banker to the new lender. The lender would carry out a verification of the documents and the income and other records of the buyer before approving a loan.
After approval, the buyer’s lender issues a cheque to your lender towards clearing the loan amount post which the documents are released by your lender. Once the buyer produces all property papers and submits it with his bank, the lender will release the rest of the amount to the seller of the property.
In addition to closing your home loan, the seller would also need to pay attention to the capital gains made due to this transaction and deal with it accordingly.
