How to Buy a Property on Which Home Loan Is Pending?

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Half of the salary of most renters is spent on the rental expense every month. That’s why many people dream of having their own home, as this saves them a lot of money and the stress of dealing with frustrating landlords.

However, people often wonder “how much do I need to buy a house?” in order to start saving up money accordingly. In addition to the upfront cost, they also need to consider other home-related expenses, such as home improvement costs.

With money being the major constraint, such people are more inclined towards buying a property on which a home loan is pending. However, on the other hand, investing in a house with cash means you don’t have to deal with the hassle of interest costs and other mortgage closing costs.

Also, you don’t have to fret about selling your house anytime, like a house without any loan on it is quite easy to sell.

Then the real question is why do people still buy or even prefer buying property on which home loan is pending? Keep reading to know!

Benefits of Buying a Property with Pending Home Loan

As paying upfront cash for buying a house can tie up their investment in a fixed non-current asset, buying a property with a pending loan seems like a better option.

Moreover, such properties are sold at a reduced price in the market as they have been occupied by homeowners for a period of time, so they may have suffered a bit of wear and tear. Also, as the loan is still pending on the property, this also reduces the price.

In addition to this, such properties are usually no older than ten years as owners seek better investment options with capital appreciation, and they are quick to switch and may also offer a better deal to you.

Buying a Property on Which Home Loan Is Pending 

Now that you know the benefits of such properties, you also need to physically verify the property and need to ensure its legal status before making any payment. You simply don’t want to make an investment in such assets where you may have to face various legal issues down the line, therefore, making your investment worthless.

Hence, you need to ask the seller for certain documents to verify the legal status of the property you are intending to purchase.

Documents to Check While Purchasing a Property That Has an Outstanding Loan

It’s recommended to make a checklist of all the required documents when investing in a bank mortgaged property and compare it with documents that you need to get from the seller. This will make sure your investment is completely safe.

Sale Deed

As the original document will be with the bank, you need to get the photocopy from the seller and compare it with the original document at the bank. This will verify the ownership of the property.

Tax Receipts

You should get the receipts from the seller to confirm paid municipal bills such as water, bill, and electricity. It’s also recommended to check which bills are pending on the property.

No-Dues Certificates

You should also obtain no-dues and no-objection certificates from the bank as well as the builder of the property.

Certificate of Encumbrance

You should get a certificate of encumbrance from the sub-registrar to confirm the economic and legal liabilities on the property.

Building Permit

In addition to building permits, you must obtain NOC, zone regulations, sanction layout, and occupancy certificate.

Other Documents

You need to inquire with your state to ensure you have all the required documents for purchasing a property on a pending loan. As buying and selling of such properties entail different legal procedures, it’s better to take guidance from a lawyer as well.

Documents to Check While Purchasing a Property That Has an Outstanding Loan

You can purchase a property on which a home loan is pending by following either of three methods.

Buying Property by Paying the Loan Yourself

You can ask the seller to request the bank to hand over them an outstanding housing loan certificate and you, as a buyer, can transfer the exact pending amount to the seller’s account to settle the outstanding loan.

As the amount of the loan will be cleared, you will be able to proceed with the buying process as you would normally do without having to deal with extra stress.

Buying Property by Taking the Loan from another Lender

It’s also possible for you to take a loan from a lender other than the seller’s lender. You can ask the seller to hand over the loan certificates along with other required housing certificates to you, so you can submit these documents to your lender.

After the lending institution makes sure that you’re eligible for the loan, you will be given the loan and the property will be transferred to you according to the set procedures.

Buying Property by Taking the Loan from the Seller’s Lender

The seller can also sell his property with a pending loan to you, in case he transfers the loan to you. Of course, the bank will thoroughly verify your financial status to assess if you will be able to pay the outstanding amount.

One positive side to this procedure is that as the seller’s lender already holds all the information, the entire process will be quicker and smoother. After all three parties i.e., bank, seller and buyer come to an agreement, you will become the new owner of the property.


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