16 maja 2023

Sale and purchase of an apartment or house with a mortgage?

Sale and purchase of an apartment or house with a mortgage?

 

Can you sell your property while paying off your mortgage? Of course. This is a standard situation. You can also easily buy an apartment or a house if the seller is still paying off the mortgage. You or your bank transfers the funds partially to repay the seller's credit. The second part goes to the seller's personal bank account indicated in the notarial deed. Both as the seller and the buyer, you should know what documents will be needed for the transaction and what situations to prepare for. The sale of an apartment or house with a mortgage is also often associated with the creation of an empty mortgage space. In this regard, the practice of banks varies. In this post you will learn about the banking procedures for crediting real estate encumbered with a mortgage loan, what the process itself looks like and what cases you may have to deal with.


After what time can you sell an apartment or a house with a loan?

 

There are no time limits for the sale of a mortgaged property. As a seller, however, you must take into account that the other party to the transaction will require updating the land and mortgage register. In particular, this applies to the entry of the seller (seller) in section II of the land and mortgage register. There are transactions on the market where in Section II of the Land and Mortgage Register there is still a mention of a change of owner, and the new buyer sells the property further. This can be a problem for the bank. If you, as the seller, have a mortgage, the bank's commission may appear in the costs for the early full repayment of the mortgage. Also take into account the tax office and possible income tax on sales, when the sale takes place before the end of 5 years. Failure to update the land and mortgage register is a common case when we have real estate heirs on the seller's side. Then it is enough to submit documents confirming the acquisition of inheritance to the buyer for the loan application, and then to the notary public for the notarial deed.


Do you need bank approval to sell real estate with a loan?

 

Normally NO. The consent of the lending bank for the sale of real estate is not needed. You need to obtain an appropriate debt certificate from the bank. You will repay the loan entirely with the funds obtained from the sale of the property from the buyer.
The only exception may be the situation when the loan is secured by two properties, e.g. two apartments, and you want to sell only one of them. Then you must obtain the bank's consent in advance and a promise to delete the mortgage for the property being sold.


 

What does the bank's certificate of debt contain?

 

In addition to standard documents, as a seller, you submit to the other party of the transaction, already at the stage of the preliminary agreement, a certificate from the bank whose mortgage is entered in section IV of the land and mortgage register. As a buyer, you may need this document at the time of applying for a loan.

 

Necessary elements of the bank's certificate to repay the loan:

  • Borrower's data, credit agreement details.

  • Debt amount (principal, interest, bank commission).

  • Bill (technical) for the full repayment of the mortgage.

  • Information that no agreement was concluded with the borrower resulting in the replacement of receivables (applies to new type mortgages and single capped mortgages).

    The last point usually applies to new types of mortgages, i.e. those established from February 20, 2011. For new mortgages, after the "old" mortgage is deleted, the so-called a vacated mortgage place that the owner can dispose of. Both in the case of new mortgages and those established before February 20, 2011, but with uniform bail bonds (usually used for foreign currency loans), it is possible to conclude an agreement with the creditor (bank) resulting in the replacement of the debt. This means that the bank can secure another loan with this "old" mortgage.

 

Other documents needed to sell real estate with a loan?

 

The rest of the documents are a standard list. The one below includes the documents required by the bank crediting the mortgaged property. The list of documents required by the notary may be longer and it is worth determining it in advance.

  1. The basis for the purchase, which is usually a notarial deed of the seller. The basis for the acquisition may also be an allocation or a court order. The crediting bank will ask for such a document in certain situations.

  2. In the case of a cooperative ownership right to the premises, a certificate from the housing cooperative with information on who is entitled to the premises. SM also informs whether the premises has a land and mortgage register or whether it is possible to set up a land and mortgage register. In addition, it provides the number of the land and mortgage register under the building and information about the lack of arrears in fees.

  3. A document confirming the usable area of ​​​​the residential premises itself. This applies to situations where the land and mortgage register includes a total area with a basement or a storage room. Such a document may be an excerpt from the premises file.

  4. Extract from the land register and a copy of the cadastral map for houses.

  5. A document confirming access to a public road. Most often for houses, but it also happens that a residential unit can be located on land with indirect access to a public road. Therefore, you may have to deal with the easement of the passage or the need to purchase also a share in the road plot.

  6. Documentation confirming the usable area of ​​​​the house and the layout of the rooms. Such a document is most often a construction project. In the absence of a design, it may be an inventory or measurement made by an expert in the valuation.


Buying a property with a cash?

 

If you are a cash buyer, you agree with the seller what part of the price you will pay before the notarial deed and what part after the notarial deed. You decide for yourself whether the payment of the price will be a one-time payment after the notarial deed, or whether you, as the buyer, will require a certificate allowing you to delete the mortgage before paying the last part of the funds. As a cash buyer, you have more room for non-standard rules, e.g. you can agree to pay in tranches.

 


One-time activation


In the event that we have a lending bank on the buyer's side, both as the seller and the buyer, you must take into account certain restrictions. The content of the notarial deed of purchase and sale must take into account the conditions imposed by the lending bank. The main difference concerns the rules of launch.

 

Mortgage loan for the purchase of real estate encumbered with another loan


The bank disburses the loan at the same time in full to two different accounts. Part to repay the seller's loan in accordance with the bank's certificate. The remaining amount goes to the seller's personal account indicated in the notarial deed.

 

Launch in tranches


The buyer's bank transfers the funds in two tranches. The time interval between tranches may be 2-4 weeks. The bank transfers the first tranche to the seller's account until the seller's loan is fully repaid. The second tranche goes to the seller's personal account, but only after submitting a copy of the application submitted to the court to delete the mortgage on the seller's loan.

The lending bank decides whether the loan will be disbursed once or in tranches.

 

Early repayment instruction


Regardless of the fact of transferring funds from the housing loan to the account for the full repayment of the mortgage loan of the seller of the property, it may also be necessary to submit an instruction to repay the loan in full. The seller must complete the required formalities. Without this, he will not receive a loan repayment certificate. However, it is worth obliging the selling party in the content of the notarial deed to immediately submit to its bank an instruction to repay the mortgage in full. In such an instruction, the borrower indicates from which account the bank is to collect any underpayment or where to transfer the overpayment. Without instructions, the funds that have been credited to the loan repayment account may wait to be credited.

 

Letter "Mazalny" 


After the mortgage is repaid, the seller receives a certificate from his bank confirming that the loan has been fully repaid, along with the consent to delete the mortgage. This is the so-called mazalny letter. The original of this certificate is handed over to the buyer by the seller. It is the buyer of the real estate as the new owner who applies to the court to delete the mortgage of the seller's bank. This court application will be either a condition for disbursing the second tranche or a condition to be met after disbursement of the loan, e.g. within 60 days.he buyer's bank transfers the funds in two tranches. The time interval between tranches may be 2-4 weeks. The bank transfers the first tranche to the seller's account until the seller's loan is fully repaid. The second tranche goes to the seller's personal account, but only after submitting a copy of the application submitted to the court to delete the mortgage on the seller's loan.

The lending bank decides whether the loan will be disbursed once or in tranches.

 

Vacant mortgage place after mortgage of the seller's bank


Whether there will be an vacant mortgage place after the mortgage of the seller's bank depends on the date of establishing the mortgage. The cut-off date is February 20, 2011. Whether the buyer's bank will require the entry of a claim to transfer its mortgage to the vacated place depends on the bank. Not every bank uses this right. The entry of a claim to transfer the mortgage to the place vacated after the mortgage of the seller's bank is associated with an additional court fee of PLN 150. The right to dispose of the vacated mortgage place expires at the moment of submitting the application for the deletion of the "old" mortgage. Some banks only oblige the borrower to establish a mortgage in the first place, "trusting" that the buyer will not enter another mortgage in the meantime.
The right to dispose of the vacated mortgage place cannot be waived.
 

The amount of the buyer's credit and the amount of the seller's debt

 


Buyer's credit higher than debt

 

This is the standard and most common situation. If the real estate buyer takes out a housing loan for this purpose in the amount higher than the debt resulting from the seller's loan, the bank's procedure is standard.

Depending on the bank, the only question will be whether the launch will be one-time or in tranches. The moment of payment of the entire price translates into the moment of taking over the property. Hence, most buyers prefer a one-time start.

 

 

Buyer's credit lower than debt

 

A different situation will occur if, as a buyer, you make a large down payment and the loan you apply for is much lower than the debt to be repaid by the seller.

 

Example:

  • the price of the property is PLN 400,000

  • extension of the seller's debt PLN 250,000

  • the buyer's own funds PLN 300,000

  • redemption of the buyer PLN 100,000

    A bank granting a housing loan for the purchase of an apartment or a house encumbered with a mortgage from another bank, as a rule, closes the transaction, i.e. repays the seller's loan in full.

    Thus, in the launch conditions, a new certificate will appear confirming that the debt is not higher than, for example, PLN 100,000, for which the buyer applies.


 

What does the bank's condition mean for the parties to the transaction?


Based on our example, the real estate buyer transfers own funds in the following amounts:

  1. PLN 150,000 to the loan repayment account with a simultaneous obligation for the selling party to submit an instruction for partial repayment of the loan.

   2.Ipartial repayment of the loan. PLN 150,000 to the seller's personal account indicated in the notarial deed (including the advance payment or           advance payment).

The payment deadline specified in the content of the notarial deed should take into account the condition and time that the selling party will need to submit an instruction for partial repayment of the loan and obtain a new debt certificate. Most often, an extra week will be needed for these formalities.

The remaining part of the price in the amount of PLN 100,000 will be transferred by the bank crediting the buyer.

 

And is it not possible to settle the seller's loan with the buyer's own funds?

 

You can. If the buyer contributes own funds in excess of the seller's loan, the parties may agree that the loan will be repaid with the buyer's own funds. However, these arrangements must be made already at the stage of the preliminary agreement and the bank crediting the buyer must receive this information in order to adjust the terms of the loan payment. If the seller's loan is to be fully repaid from the buyer's own funds, the bank crediting the buyer will transfer the entire loan (our example PLN 100,000) to the personal account indicated in the notarial deed.

In such a scenario, already in the terms of disbursement of the loan for the buyer, a copy of the application submitted to the court for the removal of the mortgage of the seller's bank along with a certificate of full repayment of the loan will be submitted. Thus, the date of disbursement of funds from the loan specified in the content of the notarial deed must include additional time (minimum 14 days) for the seller to repay the loan in full, obtain a letter of consent, hand it over to the buyer and submit an application to the court. As a standard, the notarial deed includes a period of 7-14 days for the payment of funds. If a complete settlement of the seller's loan is to be made en route, this period may be extended to a month. While you can get a debt certificate immediately at a bank branch or even via online banking, you have to wait 7-14 days for documents releasing the mortgage.

 

If the seller's debt is repaid from the buyer's own funds, a court application to delete the seller's bank's mortgage will be in the conditions of disbursement of the real estate buyer's loan.

 

 

 

Are you selling a property with a loan, but you do not want to repay the loan?

 

As a seller of an apartment or house with a mortgage, you may not want to pay off that old loan. In such a situation, you can offer the bank other collateral, another property and delete the mortgage before the sale. It can be a third party property, a family property. A special solution may be applied by the bank in a situation where the property is encumbered with a foreign currency loan, e.g. in CHF, and the proceeds from the sale are intended for the purchase of a new property. Probably not in every bank, but it is possible to apply a solution in the form of payment of funds obtained from the sale as a deposit to the account indicated by the bank. The bank then uses these funds to purchase another property. This new property will be the target collateral for the loan in place of the one sold. You must ask your bank about the possibility of selling a property encumbered with a loan using the bail procedure.

 

 

Feel free to comment. Is the topic of credit analysis interesting for you? Let me know in the comment. Will be happy to help clarify all issues. It is important to me that every topic regarding the mortgage is absolutely explained.

 

 

 

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Mortgage broker

Michal Kaplon

os.Stefana Batorego 80

60-687 Poznan

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