Sale of Mortgaged Home

    Tarun, aged 34 Yrs, had taken a home loan amounting to Rs. 15 Lakhs for a studio apartment. He has been paying his home EMI unfailingly for the last 6 Yrs. Now, Tarun has moved to a better job and is considering buying a bigger house as the present apartment is not sufficient to address his needs for his growing children. The outstanding amount on this apartment remains Rs. 11 Lakhs. Tarun is in doubt, if he could sell his studio apartment against which home loan is still outstanding. Then the answer is YES, Tarun could deal with this situation in these ways: -

1. When Buyer is taking loan from the same Bank as that of Seller: - When potential buyer agrees to get a loan from the same Bank from which Tarun’s loan is attached, the process could be taken off simply with minimal documents. Since, the Bank itself had verified the legitimacy of the property; buyer will also be saved from hassles of verification.
2. By Entering into Sale Agreement with Buyer : - If buyer gets a pre-approved loan then Tarun could enter into an agreement with the Buyer specifying the clause that the outstanding loan amount will be paid with the sanctioned loan amount of the Buyer. Once the loan is pre-paid, Tarun will get the original documents in his name and he could execute the sale deed with the Buyer.
3. When Buyer pays the down-payment : -Tarun could directly pre-pay the outstanding amount with the down payment he will receive. Once original documents are transferred in his name, he could proceed with the Sale deed and the outstanding amount could be paid to him from the Buyer’s sanctioned loan.
4. When Buyer pays in Lump sum: - When potential Buyer agrees to pay him lump sum, Tarun could settle his dues with the Bank and get the documents registered in his name. Buyer could take a loan, later on, once the legitimacy of the documents and property are verified by the Buyer’s Bank.

Tarun could opt to move to a bigger home by taking another home loan and paying a higher down payment. By doing this, he could restrict the tenure of his home loan to below 20 years or by decreasing the monthly installments which would be higher otherwise.