Selling a property with an outstanding home loan can be complex, as banks typically retain the original sale deed as collateral. However, if you have the original sale deed in your possession, follow these steps to determine your next course of action and ensure a smooth transaction.
Step 1: Obtain the latest Encumbrance Certificate (EC)
The Encumbrance Certificate (EC) provides details of the registered loan against your property
- If the loan transaction appears in the EC, contact your bank immediately to clarify why you still hold the original sale deed.
- If the loan transaction does not appear in the EC, your property may still be mortgaged, as some banks do not register loans with the sub-registrar.
Step 2: Understanding the Buyer’s Perspective
Buyers prefer a property with a clear title before proceeding with the purchase. Even if you possess the original sale deed, it does not necessarily mean the property is free from encumbrance. The bank may still have a lien on your property.
To ensure a hassle-free transition, you must clear all outstanding dues and get the updated EC. Here are a few options to clear your loans
- Settle the loan from your personal fund before initiating the sale
- Obtain the pre-closure statement from the bank and coordinate with the buyer to use their advance payment to clear the loan.
- Transfer the existing loan to the buyer, subject to the bank’s approval
Step 3: Follow this checklist to deal with this Sale Transaction
- Check the Encumbrance Certificate (EC)
- Consult your bank to confirm the loan status and the reason for holding the sale deed
- Settle the loan using personal fund or the buyer’s advance payment, or transfer the loan to the buyer with the bank’s approval
- Obtain a No Objection Certificate (NOC) from the bank and register the Discharge Deed to remove the lien in the sub-register record
- Get the updated Encumbrance Certificate (EC) with the clear title
- Transfer the deed to the buyer and complete the sale process
CONCLUSION
Selling a property with an outstanding loan requires careful planning and coordination with the bank and the buyer. Ensuring all financial liabilities are cleared and the necessary paperwork is in place will help you achieve a smooth transaction. By following the outlined steps and seeking professional guidance, you can successfully sell your property without complications.
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