6 MinsMay 20, 2022
Keshav Patil, and his wife Anita, were house hunting for a couple of months till they found their dream home. It was in a lovely leafy neighbourhood, overlooking a small garden and not too far from the main road where they would get commuting options.
The seller planned to sell his apartment, repay his home loan and with the rest of the money, move back to his native place.
While the Patils loved the apartment, the fact that the property was mortgaged was a matter of concern. Should Keshav and Anita let go of their dream house? Or should they go ahead and buy it? If yes, are there any risks? Let us help them understand their options better.
Advantages:
- The advantage is that you can always check with neighbours about aspects like water supply, availability of domestic help, any potential waterlogging problem during monsoon, transport options, etc.
- Since it has been mortgaged with a bank is that it is likely to have done all the due diligence like checking the land title, municipal permissions, and occupancy certificate before providing the loan.
Disadvantage: The disadvantage is that a property that has been lived in may require repairs and renovations that can add to the cost.
Documentation related to the property:
Despite the assurance that the bank may have done due diligence, the Patils must obtain all the documentation related to the property. This includes the following:
- Copies of a chain of sale agreements (if there have been multiple previous buyers and sellers),
- Share certificate in the name of the seller (in case society has been formed),
- Dues relating to water, electricity and property tax,
- No Objection Certificate (NOC) from the society or Residents Welfare Association,
- NOC from the fire department (in case of a high rise).
[Also Read: What Type of Home Loan is the Best one for You?]
In addition, the Patils could consider engaging the services of a law firm to do a proper search for any pending litigation against the property or the seller which may impact the transaction.
Documentation related to the mortgage: Keshav and Anita should acquire details of the loan outstanding on the property and interest due, if any, from the seller's home loan provider.
Process:
To Purchase such property there are two options
1) Seller should close the loan if he has the required funds:
In this case, after acquiring loan details from the seller, the Patils could sign an agreement with the seller. The contract should have certain specific provisions. These should be on the following lines:
- Patils pay off the outstanding loan
- Seller acquires the original papers from his mortgage provider
- After these papers are received, the Patils can pay the remaining amount to the seller and conclude the transaction.
- If the seller cannot obtain the original papers within a specified period, he would have to return the amount paid by Patils along with applicable interest.
2) Home Loan can be availed from the same bank or another bank, where the current loan gets foreclosed with the disbursement of a new loan amount and the balance, if any, can be paid to the seller:
If Patils are taking a home loan to fund the transaction, it makes sense for them to borrow from the same bank that lent to the seller. This hastens the deal process as the bank will deduct the outstanding loan amount from its loan to the Patils and transfer the rest to the seller.
Axis Bank offers a range of home loans and top-up home loans tailored to meet your needs. You can know more about home loan interest rates, home loan eligibility, and use Axis Bank’s home loan EMI calculator online.
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