Sale of a flat with a mortgage, as well as its purchase, are not a problem. Credit is not an obstacle here. Of course, both the seller and buyer should complete certain formalities. We advise on how to deal with this transaction step by step and how to prepare for it.
Sale of a mortgage flat
Ownership of a mortgaged flat does not mean that we must be associated with it until we owe the loan. Despite the fact that a mortgage entry for the bank is established in the land and mortgage register of the real estate, we are still formally the owner of the flat. And this means that we can dispose of it – sell it, rent it.
How to sell a flat with a mortgage step by step? What documents are needed?
Here’s what the process of selling an apartment with a mortgage looks like along with the documents that will appear at each stage.
Step 1. Debt certificate
A certificate of current debt must be obtained from the bank that granted the mortgage. The document will clearly show the amount of debt plus interest, i.e. all costs incurred by the flat.
Step 2. Listing the flat for sale
Knowing the exact cost of the loan that needs to be settled, you can set the price of the apartment and put it up for sale. In the announcement, it should be noted that the apartment is charged with a bank mortgage.
Step 3. Obtaining a promise from the bank
The bank issues a promise valid for 30 days, i.e. a statement of consent to remove the bank from the real estate mortgage immediately after settling the debt.
Step 4. The sales process
A prospective contract must be signed with the prospective buyer – the bank requires it. It should take the form of a notarial deed. It is mandatory to include information about the division of the amount for the sale of the apartment into two parts. The first of these is the amount that is a liability to the mortgagee, i.e. the bank, and goes to his account. The second part is the amount of surplus after sale, which is the profit of the seller.
Step 5. Removing the mortgage from the land and mortgage register
The seller of the property, its buyer or bank may apply for deleting the mortgage from the land and mortgage register as a creditor. To the application, which is submitted to the court, we attach a certificate from the bank that the loan has been repaid and proof of payment for activities related to removal from the mortgage.
Fees, taxes and bank commission
Notary fees associated with the sale of an apartment can be divided between the buyer and seller. The tax is paid by the buyer. Here it should be emphasized that if we sell the apartment with a mortgage within 5 years of buying, we will have to pay personal income tax, which is 19% on income. But if the money from the sale will be used to buy a new apartment, it can be avoided.
For early repayment of the mortgage, which involves the sale of an apartment, the bank is entitled to compensation. This is a standard commission, the amount of which is between 1% and 2.5%.
Buying a new apartment and transferring credit
The sale of an apartment with a mortgage may also involve the purchase of a new property and the transfer of an existing loan to it. This can be done, but under several conditions. It is not possible to buy a flat with a mortgage. The property cannot be indebted and cannot be subject to third party claims. It can’t be cheaper than the property you want to sell.