How to Sell Your Property With a Pending Home Loan in India?
Selling a Home with an Ongoing Loan? Here’s What You Need to Know
Suppose you bought a 3BHK flat in 2020, and now you want to buy a 4BHK flat due to your family’s expansion and need for more space. But you have an ongoing home loan on this property, and the original property papers are kept with the bank as security.
Now the question is: Can you, or someone in the same situation, sell their property with an existing loan? What procedures do you need to follow, and what documentation is involved?
Today, in this blog, we will clarify all these questions.
Can you sell a house with a pending home loan in India?
Yes, you can sell your flat with a running home loan or sell a property under loan in India. For that, you have to take the lender’s consent, which will be given in the form of a letter containing information about pending dues, outstanding payment details, prepayment charges, and the documents held by the lender.
How to sell the property with running home loan?
There are two possible scenarios: either the new buyer pays off the existing loan in full, or the loan is transferred to the buyer. In the second case, the buyer can either take over the loan with the current lender or request the current lender to transfer the loan to a bank of the buyer’s choice.
1st option – Paying off the loan
In this option, the buyer gives you the total consideration of your flat or property, which you can use to pay off your loan, and the rest you can keep with yourself as profit. As soon as you pay your remaining amount to the bank, the bank will release your property documents, such as:
Key Property Documents Held by the Bank
• Original Sale Deed / Title Deed – Proof of ownership of the property.
• Agreement to Sell – If applicable, especially in under-construction properties.
• Allotment Letter – Issued by the builder or authority (for new properties).
• Possession Letter – Provided by the builder when handing over the property.
• NOC from Builder or Society – Confirms no dues on the property.
• Previous Sale Deeds / Chain of Title – To verify legal ownership history.
• Approved Building Plan – Sanctioned layout by local authority.
• Encumbrance Certificate – Shows the property is free of legal dues.
• Completion Certificate / Occupancy Certificate – For ready-to-move-in homes.
2nd option – Applying for a new home loan
In this option, if the buyer is unable to pay the amount in a lump sum, it is advisable for the buyer to go with the same bank for the home loan, as it makes the process easier. The seller/buyer must explain the situation to the bank, and the bank will apply for a new home loan in the new owner’s name while paying off the old loan with the new loan taken.
Now, if the new buyer finds that the existing bank has a higher interest rate and they can get a loan at a better rate from another bank, you can ask your bank to provide an undertaking (written assurance) addressed to the buyer’s bank that, upon receiving the outstanding payment, your bank will hand over the documents to the buyer’s bank.
After the buyer’s bank receives the property documents, you can pay off any remaining amount to the seller directly and begin paying your EMIs to the new bank. Then, you can initiate the property’s registration process.
In short, Yes, you can sell a property in India with a pending home loan. To do this, you need to get a No Objection Certificate (NOC) from your bank, which states that they have no objection to you selling the property.
The buyer can then pay off your outstanding loan directly to the bank. Once the loan is cleared, the bank will release the original property documents to the buyer or their bank, allowing the sale to proceed.
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