Buying Mortgaged Property? Follow These Tips


A mortgaged property is classified as a property having an outstanding home loan. Buying a house that is on a mortgage has various benefits. First of all, the buyer has the advantage of getting a ready property in a decent and established area with convenient facilities. Loan against property or mortgage loan differs from buying a mortgaged property.

Secondly, the buyer trades with a single seller instead of a sales company attempting to hard-sell a property. Mostly a mortgaged property deal can benefit both the seller and the buyer. In this article, we will provide essential information regarding the procedure.

How To Buy A Property With An Outstanding Loan?

You might have questions in mind like how the ownership gets transferred? And how is the sale agreement made? Here are your answers

  • The essential documents required to sell residential property are the purchase/sale deed of the property, and in a few cases, the housing society share certificates.
  • If different people have bought the property several times, the forthcoming buyer has the liberty to ask for a copy of all earlier deeds.
  • If the property is bought with a home loan, then original papers of the property are mortgaged with the credit institution. Therefore, the seller could provide the buyer with photocopies of the mandatory documents to instigate the deal.

When The Buyer Avails A Mortgage Loan To Buy A Mortgaged Property :

  • Paying off the initial loan:If the buyer wants to apply for a mortgage loan to finance the purchase of a mortgaged property, then the seller will have to pay off the home loan first. As it is not possible to transfer the home loan from the seller to the buyer.
  • Treatment of the mortgage loan taken by the buyer:If the buyer wants to be eligible for a new home loan. The buyer is expected to submit all financial documents to the credit institution, and the creditworthiness of the buyer should be good enough to convince the credit institution in providing them with a home loan.
  • Fees, charges, and interest rates:The new loan will include payment of processing fees and administration and legal charges. The credit institution may waive off some of the charges if they wish to. The interest rate of land mortgage loan will be according to the current MCLR plus the extent determined by the lender established on fundamental aspects such as current liabilities, income level payment history concerning loans/credit cards, etc. Sometimes it is favourable to take a home loan from the same credit institution where the property of the seller is mortgaged.

When the buyer buys the property with their funds :

  • Letter from the credit institution:The seller needs to receive a message from the credit institution where the property is mortgaged stating that the credit institution agrees to withdraw the original documents of the property after the full payment has been made on the current home loan.
  • Paying off the outstanding loan:A specific date is given by the lender to pay off the outstanding mortgage loan. The time given by the credit institution to the seller to clear the outstanding loan can be mutually worked out between the two parties.


It is a tricky process to buy a mortgaged property. As there are various rules to purchase different kinds of properties. You can avail a mortgage loan to get help in financing your purchase. Thus, it is always favourable to take legal advice before moving forward to buy a mortgaged property. However, if you manage to pull it off, odds are you will have made one of the most profitable investments of your life. Make sure to check the interest rates of land mortgage loans to choose the best loan available according to your requirements.