If you are buying a resale flat where the seller has an existing home loan, you have several options to proceed with the transaction. Let’s explore these options and understand the safest way to handle this situation
OPTIONS FOR HANDLING THE SELLER’S EXISTING HOME LOAN:
Option 1: Loan Transfer within the same bank:
The process is relatively simple if you are taking a home loan from the same bank where the seller has their loan. The bank will transfer the loan balance from the seller’s account to your account without releasing the property documents.
Option 2: Loan Transfer to Another bank:
The process of taking a home loan from a different bank involves,
- The seller collects the List of Documents (LOD) from their bank
- Handing over the LOD to your bank
- Your bank issuing a cheque to the seller’s bank to settle the loan
- Collecting the property documents from the seller’s bank
Option 3: Self-Finance (without a Home Loan)
If you are buying the property with your own funds, you can directly help the seller clear their loan by making a payment to the seller’s bank. Once the loan is cleared, the seller can collect the property documents.
However, this option carries some risks:
- The bank will not release the property documents directly to you
- The seller may delay handing over the documents until the Sale Deed is Registered, which can be stressful
CASE STUDY: LOAN TRANSFER FROM ONE BANK TO ANOTHER
Here is a real-life scenario we encountered recently:
- Property Details: The resale flat’s price was Rs. 60 Lakhs, and the seller has a loan outstanding of Rs. 22,25,408 from IDFC First Bank
- Buyer’s Loan: The buyer took a loan from SBI
Procedure Followed:
- The Buyer paid a token amount of Rs. 10,000 to the seller and signed the Sale Agreement
- The Seller collected the LOD from IDFC First Bank and handed it over to SBI
- SBI approved the buyer’s loan of Rs. 50 lakhs based on the LOD, Sale Agreement and income proof
- SBI disbursed the loan amount in two cheques:
- Cheque 1: Equivalent to the seller’s loan outstanding amount, addressed to IDFC First Bank
- Cheque 2: Final settlement amount, addressed to the seller’s name
The seller and SBI representative visited IDFC First Bank to hand over the cheque 1 and collect the title documents
(Note: The cheque for loan clearance is addressed to the seller’s bank. Refer to below image)

- The buyer and seller registered the Sale Deed
- Seller and Bank registered the Memorandum of Deposit of Title Deed (MODT)
- SBI released the cheque 2 to the seller as the final settlement
KEY TAKEAWAYS:
If self-Financing:
- Write a cheque directly to seller’s bank for loan clearance
- Be cautious, as the seller will collect the property documents and may not hand them over until after Sale Deed Registration
If Taking a Home Loan:
- This is the safest option
- The bank manages the financial transactions and secures the property documents on your behalf
Pro Tip: Even if you can self-finance, consider taking a small home loan to ensure a secure transaction.
For consultation, please write to us pgnproperties@gmail.com or WhatsApp to +91-97424-79020
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