Buying a Mortgaged Property in India


Buying a dwelling that you can call your home is a dream come true! However, it isn’t always that you find a brand new property. In fact, in the present day times of unprecedented dynamism, there is a good chance that you will end up seeing one that already has an outstanding loan! Yes, that true. And such a plot of land or constructed house is known as a mortgaged property.

So should you be buying it? And if yes, how will it work out? And, How to Qualify for a Home Loan?

Don’t worry. You are about to find the answers to these questions and more.

To begin with, yes, you should consider buying a mortgaged property by all means. Here’s why –

  • Such a property is usually not older than 5-10 years. The most likely reason that the owner is looking forward to making a sale is rapid appreciation. For all you know, this is an astounding advantage.
  • It isn’t difficult to understand that a house with an outstanding loan will prove to be a cheaper purchase than a new one. Moreover, in most cases, you can negotiate an even better price. Buying a ready to use property, at a discounted price is undoubtedly a win-win situation.
  • Given that a bank has already evaluated the property, it is more than comfortable to get a loan for the same. In fact, if you opt to take a credit from the same lender, you can end up saving a lot of your precious time and efforts, pertaining the verification of documents and evaluation of the residential project.

Now that you know, that buying a property with an outstanding loan is advantageous in more than one ways, let us help you with the other intricacies of this process.


Buying a home is a tricky process, more so if it is a used one. Hence, we recommend you to seek the assistance of your legal advisor in this matter.

As far as the documentation is concerned, procure a copy of the sale deed, the stamp duty as well as property tax from the seller. Not only will this tell you that the seller is indeed the owner of the house, but will also help you ensure that there are no pending taxes that need your attention.

Buying the Property Using Personal Funds

In case you’ve sufficient fund to make the purchase upfront, visit the seller’s lender and pay the outstanding amount of the loan. You can then settle the remaining cost of the property to the seller, and get the papers transferred to your name.

This may, however, take some efforts on your part. For instance, you will first need consent from the seller’s bank stating that it will release the original papers of the property after you fully settle the outstanding loan. You may ask the bank for a suitable time span for making this payment. However, if you fail to pay the dues during this span, you may face a penalty.

Once you make the settlement, you can then go ahead to get the ‘No Dues’ certificate from the bank. The bank will then release the papers within a fortnight’s time.

Buying the Property through a Home Loan

  • In case, you wish to take a loan from the same lender as the current owner’s; you can close the existing credit by using the funds you had set aside for the down payment. To do so, you will first need to apply for a Home Loan to the same bank. Only once your loan is approved can you go ahead and make the settlement.

The bank will then transfer the property to your name, and you will get the papers within a fortnight’s time.

  • If you wish to approach any other bank, housing Finance Corporation or online lender for your Home Loan, you will first need to close the seller’s current mortgage. You can do so by using the amount you had set aside for the down payment. To do so, you will first need consent from the seller’s bank stating that it will release the original papers of the property after you fully settle the outstanding loan.

Once you pay off the loan, you will get a ‘No Dues’ certificate from the bank, after which the bank will release the original property papers.

Next, you need to get the papers transferred to your name, following which, you can proceed to apply for a loan from another bank. In this case, however, when you approach another lender, you will still be required to make a down payment on your loan to get processed. This can be an arduous task if you don’t have sufficient funds. Hence, we recommend you to enter a tripartite agreement, between you, the seller and the bank. The deal will imply that you will first settle the current loan, and then start paying off the new mortgage so that the bank can transfer the papers to your name at the earliest possible.

When you’re purchasing the property with the help of a Home Loan, we suggest you compare the interest rates and additional charges levied by different lenders and then choose the one which helps you in saving a significant amount of money.

Also Read: Types of Home Loans Explained

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