Sale on mortgage

In these times, when salary and income levels are doubling every couple of years, it is quite natural that you want to shift to a bigger house in a better locality. Some of you had already bought small houses in distant suburbs many years ago when that was all what you could afford.

Now when you want to move to a bigger house, you have a choice to retain the existing house and give it on rent. But for many, this may not be viable. You may need to sell the existing house to fund the new, bigger house. As you had funded your first house with a home loan and still have 7 or 15 years to go before completing the payment, a question arises: Can you sell your existing house that still has a home loan on it?

The answer is yes, you can. But for that you need your home loan lender's consent. It is not difficult to obtain that. Every bank has a clearly laid out process to help you sell your home with the loan. With the consent letter you will be able to start negotiation for the sale of your house. The buyer to your house will need to pay directly to your lender bank the outstanding loan amount and the bank will release the lien on your house. Given below is a step-by-step procedure on how to sell your house with a loan:

Step 1

Tell your lender bank about your requirement and request them to issue a consent letter to you. The consent letter will typically provide the amount, on payment of which the outstanding loan will be fully paid off.

This amount includes the prepayment charge, if any, chargeable by your bank and should list the documents held by them that will be released on payment of the stated amount. This amount mentioned in the certificate is typically calculated as on a future date, to enable time for the buyer to arrange the payment.

Step 2

Based on this certificate, you can negotiate the sale of your house with potential purchasers.

If the new purchaser takes the loan from your existing bank, the process is far simpler than if he were to take the loan from another bank, which may need the title deeds in its hands before it agrees to release payment.

In the event the purchaser is not taking any loan and is making an outright payment, the new purchaser can make a cheque favouring the bank for an amount equivalent to the amount stated in the certificate. This will clear your home loan. For the balance amount, he will provide a cheque in your name. Your property documents will be released to the buyer only when you have prepaid your entire housing loan.

The author is CEO of apnaloan.com