What Happens to Your Mortgage When You Sell Your House?

A home is a place where we feel relaxed and if it is owned it gives more serenity. For any reason, if we feel compelled to surrender such a peaceful paradise for a few bucks, then such succumbing pressures must be dominant and need careful thought. Nearly 80 % of houses are purchased with the support of banks and financial institutions through loans and mortgages. The degree of banking may vary from person to person vis-à-vis their earnings and saving potential. Some may mortgage it for 10 years, and some for 30 years. Presuming that the economic and financial conditions of individuals will remain constant throughout such a long term happens to be a myth in many cases. Contrarily, there may be other classes of people who speculate money through buying and selling in real estate and for which they mediate the banks and financial institutions. Nevertheless, the rules of the game remain the same irrespective of the nature and purpose of buying and selling.

Fundamentals of selling a house precondition that such houses must be free from all encumbrances may they be financial or obligatory. Due diligence on such assets must be done beforehand and dues if any must be cleared so that no future confusion arises between the seller and buyer. Another interesting fact is that, without clearing all previous dues, the mutation process and the title of the seller will not be included in the documents. Therefore, such mortgaged houses which are still with banks as partial ownership might be either not considered by the prospective buyers or maybe undervalued than their actual worth. In either case, the sellers will be on the receiving end and most likely land up in a loss.

There are three perspectives that dominate the scene.

• Sell the house for more than its value which allows the owners with some extra funds to reinvest in other downsized properties in any buyers’ market.
• Sell the house at par with the value so that all the dues get cleared and can leave peacefully in a rented or leased house.
• Sell the house at less than its value and still continue to pay the dues even after its disposal.

Most of the time, the first two cases are quite common and people prefer to sell either at a value higher than its original value or at least equal to that. People when facing a severe financial crunch for a longer period and seeing no scope of recovery, only then the third option resorted.

However, there are certain formalities that sellers need to undertake:

A loan clearance or mortgage clearance letter must be obtained from the lenders duly acknowledged and endorsed by the solicitor or conveyancer at least a month before entering into any sale agreement with the buyers./p>

This process may take some time and the lenders may prefer to cross-verify the property with that of the documented and give clearance after they get satisfied.

Only after clearing the dues, the properties will become eligible for getting listed in the saleable properties.

Soon after clearing the dues of the previous mortgage, the owners of such properties may apply for another housing loan with the same lender since their creditworthiness is proved and lenders will have no hesitation in extending the credit limits if need be.

In all probability, such a process will take no less than 6 months if pursued untiringly by the owners of such property. Unless they can spare good time and money, thinking to sell the house before clearing the mortgage is not a good idea. However, people who are on the brink of breakdown due to heavy debts or lack of consistent job in hand may resort to such climax.

A very few buyers agree to undertake the mortgage transferred in their name and for which they bargain hard with the seller even to get the interest waived off or that will have to be borne by the seller. Only the principal amount of the mortgage may get transferred with the prevailing interest rates levied on it. if there is any clause of foreclosure, that can also be considered by the buyer and will take advantage of such foreclosure.