Regardless of whether the buyer finances the purchase from own resources or is using a loan, the priority is to repay and delete the “old” mortgage. The same applies to plots of land and other real estate.
How to sell a flat with a loan?
The procedure for selling a flat or a house with a mortgage is essentially the same as the transaction for real estate without a mortgage burden.
To conclude the contract transferring the ownership of real estate, it is necessary to pay the liability and delete the entry in section IV of the land and mortgage register to the bank that previously financed the purchase of the seller. Such a transaction can take place according to several scenarios.
Mortgage payment by the owner of the property
This is definitely the rarest case. This is because in most transactions of this type, the bank’s repayment funds are to come from the sale of real estate. After paying off the debt, the seller may submit a mortgage removal application.
To this end, it is required to provide a certificate confirming the payment of the claim. An application for deletion of a mortgage and entry of a new one, if the buyer uses a mortgage, can be submitted when concluding the sales contract by a notary public.
Canceling a mortgage by paying a deposit
In a situation where the mortgage has a value equal to the amount of the deposit agreed during the preliminary contract, the payment scheme is used, in which the buyer pays the agreed amount (so-called deposit) straight to the creditor’s account. Before signing the final contract, the seller is required to delete an entry charging the land and mortgage register.
The next payment tranche is transferred to the seller’s bank account regardless of whether it comes from the buyer’s own funds or from the loan.
Mortgage repayment with a loan taken by the buyer
Due to the high value of the mortgaged property, the repayment of a mortgage from a buyer’s loan is one of the most common transactions of this type. The order of payments is largely determined by the loan agreement concluded by the buyer. The bank financing the purchase of indebted property may impose a payment schedule that is safe from its point of view.
The priority in such a situation is to ensure that the “old mortgage” is deleted. Therefore, in the first stage of payment, the buyer’s bank may settle the seller’s liability by transferring the relevant amount directly to the creditor. Then the remainder of the price is paid to the seller’s bank account.
Such a payment schedule may require additional formalities. However, as a rule, the terms of the loan agreement and the sales contract are sought to be formulated so that the notary public can submit appropriate applications on behalf of the parties.