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Selling a house that has a home loan on it? Have these documents in order

You must start by seeking a No Objection Certificate (NOC) from your lender on the selling agreement

July 12, 2021 / 09:13 AM IST

Many have struggled financially to survive these past 15 months of pandemic, as many sectors faced job losses and pay cuts. As a result many people find it difficult to repay their loans, especially for an emotional investment such as a house that was bought for personal use.

In some instances, there are also people who have been repaying loans for their second house, thus suggesting heavy indebtedness. With inflation at a high and uncertainty looming large over regular, stable incomes, it does make sense to get rid of any added outstanding loans in one’s investment portfolio.

If you bought an extra house that has an outstanding loan on it, you may want to sell the property to get rid of the debt.

Before you proceed to sell your property that has an outstanding loan on it, you must seek a No Objection Certificate (NOC) from the lender on the selling agreement. Your lending bank must be notified of your intent to sell the property or the initiation of the process. The bank will intimate you about the balance loan that still needs to be repaid, thus providing the necessary evidence regarding ownership of the property submitted as collateral to get the loan. Here are more details about the process.

When both the buyer and the seller choose the same lender


Low-interest rates on home loans have encouraged many to buy houses. It would not be a surprising coincidence if the buyer also chooses to take a loan from the seller’s lending company. So, it would imply a tripartite arrangement among you, the buyer and the lending bank or financial institution.

The sale and payment process would be simple as fewer cheques would be signed and exchanged from both sides. The bank will determine the buyer’s eligibility for the loan, after which your dues will be determined. The buyer will then acknowledge the loan amount, pay off the outstanding loan amount and give you the remaining amount. The loan processing fee will have to be borne by the buyer.

What if both the buyer and the seller have different lenders?

With so many banks and non-banking financial companies ready to serve their customers, it would not be surprising if the buyer seeks a loan different from that of your lender. Both you and the buyer must submit relevant documents, including a letter from your bank detailing the outstanding liability.

As per protocol, the bank granting a loan to the buyer issues a cheque in favour of the seller’s bank to pay off the outstanding liabilities. The rest of the amount that had been paid by you will then be credited to your account, after which the property papers would be handed over to the buyer for submission to the bank for the loan amount.

What if the buyer pays from his savings?

He or she may offer to buy your property by paying you in part through cash/cheque, thus saving you the hassle of getting a NOC from your lender and the buyer from submitting documents necessary for getting a loan.

Alternatively, the buyer may choose to pay you directly in your account, the amount equal to the outstanding loan. The bank will then hand you the property documents once the loan is cleared. You must then change the property to the buyer’s name while handing him over the property documents.

If you sell the property at a price higher than what you had bought, the buyer will hand over the remaining amount through a bank cheque at the time of property transfer.

Essential Documents 

While selling your property, you must always keep the following documents handy.

-Sale deed of the property

-Documents obtained during home loan sanctioning

-Society NOC in case the property has been bought in a registered or cooperative society

-Encumbrance Certificate

-Property tax receipts

Getting rid of additional and unnecessary debt would only help you to become financially stronger, and pay for necessities rather than addressing liabilities.
Atul Monga is Co-founder & CEO, Basic Home Loan
first published: Jul 12, 2021 09:13 am
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