6/10/2012
When Sameer Khan purchased two properties in the western suburbs of Mumbai three years ago, the idea was to generate extra rental income for his family. "I had taken loans for both flats when they were under construction. Though the properties are nearly completed, it will take another six months for the developer to give me possession," he says.
However, with the steep increase in home loan interest rates, Khan is finding it difficult to service both the loans and plans to sell one property. "The profits generated from the sale of one house can be used to pay the loan for the other," he says.
Financial insecurity is just one of the reasons aproperty owner may want to sell a house for which he is still paying the EMIs. A couple of years after buying the house, you may realise the need to upgrade to a bigger property because your needs have increased.
Some buyers also prefer shifting to a better location within the same city either because it offers better infrastructure or is closer to their workplace or their children's school. If you are moving to a different city for work, you may want to settle down there after disposing of the existing property.
While these arguments are valid for a seller of a mortgaged property, it may also make sense to buy a mortgaged resale property rather than one that is under construction. The advantage of purchasing a resale property is that it may be at a better and established location and you will be dealing with an individual instead of a builder's sales team.
"When a buyer approaches a developer, the salespersons use all kinds of pressure tactics to ensure a quick sale and the buyer doesn't get a chance to conduct due diligence," says Sandeep Sadh, chief executive officer of Mumbaiproperty.com, a Mumbai-based real estate portal. In the case of a resale property, you have ample time to examine the pros and cons of the deal before taking a decision.
Another advantage with buying a resale property is that banks generally conduct due diligence for the house that they are going to finance. "So if you are planning to buy a mortgaged property, rest assured that it has got all the necessary approvals by the relevant authorities," says Sadh.
Nanda bought a 2-BHK house in Thane, in 2009, for Rs 35 lakh. The seller had an outstanding loan of Rs 5 lakh.
"When a buyer approaches a developer, the salespersons use all kinds of pressure tactics to ensure a quick sale and the buyer doesn't get a chance to conduct due diligence," says Sandeep Sadh, chief executive officer of Mumbaiproperty.com, a Mumbai-based real estate portal. In the case of a resale property, you have ample time to examine the pros and cons of the deal before taking a decision.
Another advantage with buying a resale property is that banks generally conduct due diligence for the house that they are going to finance. "So if you are planning to buy a mortgaged property, rest assured that it has got all the necessary approvals by the relevant authorities," says Sadh.
Nanda bought a 2-BHK house in Thane, in 2009, for Rs 35 lakh. The seller had an outstanding loan of Rs 5 lakh.
How he settled the loan
Nanda made a down payment of Rs 12 lakh. The seller used a part of it to prepay the outstanding loan amount and got the original documents from the bank.
Nanda had a preapproved loan, and after registering the property in his name, he got the loan processed in 10 days to pay the remaining amount.
"I got a good deal on the property as the seller was in a hurry and was not finding enough buyers because of the outstanding loan."
While the reasons for selling and buying a mortgaged property may vary, one common problem that most people face is the lack of clarity on how to buy or sell a property that is mortgaged to the bank. Can you sell a mortgaged property at all? 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?
Many property owners who have bought the house with money borrowed from a bank have grappled with these questions. "I still have to repay a sizeable portion of the principal back to the bank before I can get the original papers," says Khan, whose house is mortgaged with a leading public sector bank.
Khan plans to sell his 2-BHK house at Goregaon, for which he has an outstanding loan of Rs 19 lakh. He has purchased another house through a bank loan and is finding it difficult to process both. So, he has decided to sell one.
How he plans to settle the loan
The potential buyer has agreed to pay him a lump sum. Once the original documents are released by Khan's bank, the buyer will apply for a housing loan when the documents are cleared by his bank.
"I have a copy of all the original property documents. The potential buyer can get it verified with the bank as well."
Nanda had a preapproved loan, and after registering the property in his name, he got the loan processed in 10 days to pay the remaining amount.
"I got a good deal on the property as the seller was in a hurry and was not finding enough buyers because of the outstanding loan."
While the reasons for selling and buying a mortgaged property may vary, one common problem that most people face is the lack of clarity on how to buy or sell a property that is mortgaged to the bank. Can you sell a mortgaged property at all? 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?
Many property owners who have bought the house with money borrowed from a bank have grappled with these questions. "I still have to repay a sizeable portion of the principal back to the bank before I can get the original papers," says Khan, whose house is mortgaged with a leading public sector bank.
Khan plans to sell his 2-BHK house at Goregaon, for which he has an outstanding loan of Rs 19 lakh. He has purchased another house through a bank loan and is finding it difficult to process both. So, he has decided to sell one.How he plans to settle the loan
The potential buyer has agreed to pay him a lump sum. Once the original documents are released by Khan's bank, the buyer will apply for a housing loan when the documents are cleared by his bank.
"I have a copy of all the original property documents. The potential buyer can get it verified with the bank as well."
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