There could be many reasons for buying a property- be it for self-use or investment purposes, they are beneficial anyways. Since it is a major financial investment, people tend to take home loans to finance the property. However, there comes a time while one needs to sell the property due to various reasons such as any financial constraints or buying a bigger house bigger in a better location, etc. Whatsoever the reason is, selling a house or property is an inundating task in general and if you have a home loan outstanding, it is even more restrictive.
So, is it possible to sell a property whilst there is an outstanding home loan? Read through to understand the course of action involved here.
It is advisable to sell a property or house that has an outstanding loan amount only when you face a financial emergency or due to other pressing reasons that need to be addressed soon. Obtaining a No Objection Certificate (NOC) or a prior consent from the lender is, however, stipulated in the sale transaction. In this case, a part of the sale consideration has to be paid to the lending bank and the remaining to the new owner. Following this, the lender will provide the original title deed of the property/house, which was deposited with the bank during loan disbursement, to the present owner. The release of sale deed and sale consideration discharge will happen simultaneously.
Generally, a person buys the mortgaged property under the following conditions and circumstances:
The buyer will check the original documents of the property such as title deed, encumbrance certificate, property tax receipts, the mutation record and other litigation searches on it to verify if it’s favorable to him/her. There are also a few things for the seller to check before selling the mortgaged property. Check the documents that verify the buyer’s capability to transact the property and financial background to know about the source of funding he/she uses to purchase the property.
A person can sell a mortgaged property in two instances: one, when he receives consideration from the next buyer and the pays off the due to bank. Completed the sale with the buyer after obtaining the original property documents from the bank. Second, when he is able to transfer the pending loan to the buyer after receiving the already paid amount as per the deal. The bank, however, has the responsibility of doing its due diligence before approving the transfer of property. The bank will also check the financial background of the new buyer and do the complete checkup before approving it.
It is essential to calculate the tax liability before selling a property besides other property specifications. The legal experts suggest that the tax liability for selling properties will yield shorter or longer capital gains tax as per the Income Tax Act 1961. However, if the seller is able to utilize the capital gains for purchasing another property in two users or construct a house in three years, he can mitigate the tax impact. There are also various other factors you should pay attention to while selling a mortgaged property.
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