A home loan is a secured loan that is obtained to purchase property by offering property to be purchase as collateral. Looking at current property rates in different cities and states in India, it may be not possible for middle class or upper middle class buyer to purchase property for own source of funds. So they avail housing loans which are available at lower rate of interest and for longer period upto 30 years based on current age of borrower.
While selling property, seller need to close his existing loan(s) availed by seller either to purchase property or loan against property availed on said property from Bank or Non Banking Financial Institutions (NBFCs). Sometimes seller may not be able to close existing loan availed on said property and ask buyer to close this loan by payment of outstanding principal.
In this scenario, buyer who has planned to availed loan from Banks or NBFCs will request Bank to make payment to existing lender under Balance Transfer Scheme. So Bank/NBFCs will make payment to existing lenders which is equal to current outstanding of principal amount of loan availed by seller and balance amount of consideration value will be paid to seller against the sale of property.
Bank/NBFCs makes payment to existing lender by taking “List of Documents” and “Foreclosure Letter”. List of document is a letter received from existing lender confirming the original property documents in possession of existing lender which they will handover to Bank post clouser of loan.
Seller need to execute Guarantor Agreement/Tripartite Agreement with Bank/NBFCs along with loan agreement to be sign by borrower. Banks/NBFCs may also ask seller to execute conditional sale deed in favor of buyer before making payment of outstanding principal to existing lender.
Banks/NBFCs makes balance amount of loan amount in favor of seller on receipt of original property documents from lender along with NOC.
It is advisable that buyer should not select Seller Balance Transfer Scheme in case
- Seller is having default in repayment of loan and said account is having overdue of loan.
- Existing lender has initiated legal proceedings under SARFAESI Act to take possession of property due to overdue of EMI/repayment of loan or any credit facility availed by seller
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