Real estate prices have been ruling high across the country. In all major metros, property prices have risen so much that they are out of reach for the salaried class. Even properties in the suburbs are witnessing a lot of demand and prices have been going up. So small wonder, a number of people are looking at buying second-hand property.
If you are going for a second-hand property, some of them might have a loan running and the property might be mortgaged to a bank.
What exactly is a mortgaged property?
Mortgaged property is a property that has an outstanding loan on it. This means that the property is hypothecated to a bank until the total loan outstanding is paid off. When you buy a mortgaged property, you will have to take over that loan.
Why mortgaged property?
Second-hand properties that come to the market and are affordable are usually not older than 10-20 years. Most of the times, the age of the property is less than 10 years. The owner might be looking to take advantage of rising property prices to make a good sum of money. So, you can negotiate and get a good bargain for the property.
Another important point is that these properties are sold at a much lower rate than new properties even if they are in the same locality. This is especially true for those properties that are not built by reputed builders. By purchasing a mortgaged property, you get a ready to occupy home for a much lower cost.
The biggest possible advantage of buying a mortgaged property is that getting a home loan from the same bank where the property is mortgaged will be easy. Why? The bank has already evaluated and looked at the property documents. The property would have gone through all approvals. If you take a loan with the same bank the home loan process will be quicker.
How can you buy a mortgaged property? Here are the details.
The documents needed
You will have to get copies of the property’s sale deed and stamp duty papers to ensure that the property is in the name of the owner who is selling it to you. You will have to check the property taxes on the property. All of them should have been paid in full for all the years. Get a lawyer to evaluate the property before you make the purchase.
Closing the loan
In order to buy a mortgaged property, you will have to close the loan that is running. There are three different ways to close the loan. One is by using your own funds to pay off the outstanding balance on the loan and adjust the same on the sale price. This is possible only when you have funds and when the loan amount is not big.
Another way is to take a loan from the same bank and asking the bank to close the loan on the property using this loan. In both these cases, transfer of property in your name is easy and can be done quickly.
The third way is to get a loan from another bank and closing the loan on the property. Here, things get a bit complicated. You need to apply for a loan, make a down-payment, the loan amount needs to get sanctioned and then the bank where you took the loan will ask you to get a No Objection Certificate from the bank where the owner of the property has the loan.
Then, your bank will transfer the loan amount to the other bank to close the loan. Once this is done, that bank will transfer the property documents to your bank after a ‘No Due’ certificate is issued.
This usually takes a good number of days. You can sign a tripartite agreement with the bank and the seller to ensure that the process goes smoothly. This agreement will say that the property papers will be transferred to your name once the loan that the owner has taken has been settled.
Don’t forget to get those no objection and no due certificates. Keep a copy of all the documents that you submit. This will help you in case there are any issues. When you are going for a home loan, compare across lenders to get the best rates and terms. Taking the help of legal and financial experts can help you save a ton of money