Selling Your House Already Under Lien to a Bank

You may have purchased a house through a bank loan and then, after a couple of years, you wish to move to a larger house or to another city. If you wish to sell your house that is already mortgaged to a bank the outstanding amount of loan will have to be settled before the bank releases original property documents.

If you find a buyer who is ready to make a lumpsum payment, the process is easy and that down payment can be mentioned in the agreement to purchase, adjustable against the final value of the property. Once the property documents are released by making full repayment, you can enter into a final agreement and execute the sale deed. If you make a profit, it is considered as capital gains and if you have sold the property within three years of purchase, you would become liable to short term capital gains tax even if you reinvest in property. Both of you would need to agree on payment of registration and stamp duties involved in the property transfer process.

If the buyer intends to apply for a loan to the same bank as yours or to another bank, you will need to provide him a copy of the set of documents. The buyer should also be aware that his loan will not be considered until you have cleared the existing loan. You could execute an agreement to purchase and have the buyer advance the amount to repay the existing loan. If he is not prepared to do this, you will need to make arrangements to repay the loan and obtain the No Dues Certificate and the original set of property documents from your bank. 

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