Selling a home with an outstanding loan? Know the process for sellers and buyers

Reports coming in for today mention that A homeowner wants to sell a property that still has an outstanding home loan, but is unsure whether the existing loan must be cleared before the sale and how the bank, seller and buyer will coordinate the transaction. Today’s Ask Wallet Wise explains the procedure for selling a home with an outstanding loan.

The Ask Wallet Wise initiative offers expert advice on personal finance and money-related queries. You can email your queries to askwalletwise@nw18.com, and we will try to get a top financial expert to address them.

Is it possible to sell a home with a loan amount outstanding on it? What is the procedure to be followed by the seller as well as the buyer?

Expert's Advice: In case you want to sell the property, you will need the bank's consent for the same. This 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 the buyer to arrange the payment.

After the payment of all dues, the bank will return your original documents and offering a loan closure letter indicating that there is no outstanding amount to be paid. Please make sure you get the no dues certificate to obviate any issues in the future. The buyer can make payment of the balance sum on receipt of the original documents from the bank.

If the buyer is additionally looking for a home loan to buy your property, it is advisable to approach the same bank so that the process is likely to be easier than otherwise. That stated, the buyer will have to go through the processing of a home loan for him. The buyer’s bank will pay directly to the seller’s bank, which in turn will hand over the documents to the buyer's bank on receipt of the outstanding amount.