If you are paying a mortgage loan but are presented with a situation in which you have to change your house, you may feel tied by your obligation to the bank. At this point the question that goes through your mind is: if a house is mortgaged, can it be sold? In the next article, we will see the aspects of this type of process.
If a house is mortgaged, can it be sold?
We will begin by giving the short answer to this question: yes, it is possible to sell a house even if it is mortgaged. This process is known as a mortgage transfer and it occurs when a person who has a property with a mortgage decides to sell it to another person, either for economic or personal reasons, who will acquire both the rights and responsibilities over the property. That is, this person will not only appear as the new owner of the house but also as the new debtor before the bank.
The process of transferring a mortgage to another person is usually quite complex due to the number of legal procedures involved in getting rid of such an important debt and passing it on to someone else. And it is more complicated when the reason why the current owner of the mortgage must sell the house is that he is in a debtor situation. Even so, it is not impossible to sell a house that is mortgaged.
When selling a house that is mortgaged, the following aspects should be taken into account:
- The entire process must be notified to the bank and must be carried out with its authorization.
- The legal process is complex and everything must be notarized.
However, there is a more feasible option for the person who wants to sell a mortgaged house: agree to the purchase with a person who, under a legal and notarized contract, agrees to pay in advance a percentage of the house with the promise of sale. When the debtor receives this money, he cancels the debt to the bank in its entirety and proceeds to carry out the lifting of the mortgage, which implies terminating the payment obligation and changing the public housing registry. When the property is free of debt, agree to deliver it to the new owner of the house without charges.
Another option to sell a house that is mortgaged is to sell it to a buyer who has obtained a mortgage loan with another bank. In this process, the buyer’s bank has to pay the debt to the seller’s bank and then raise the mortgage on the house, and only then will the house become the new owner and the owner is left to pay his mortgage loan. This option is slower, however, the idea is that you know all the available options.
Now, if the buyer’s mortgage loan is issued by the same bank as the seller, the process is faster and easier since the bank simply has to pay the buyer’s debt and change the debtor’s name.
Sale with mortgage subrogation
The subrogation (substitute in an obligation or right) mortgage supposes the change or substitution of the debtor, in this case, a new debtor will take the place of the previous one. Through mortgage subrogation, the buyer substitutes the mortgage for the seller; Therefore, both the ownership of the property and the mortgage obligation remain with the new owner.
It is advisable that when buying a mortgaged house the mortgage subrogation is carried out; So if you are thinking of subrogating a mortgage, you must apply to the bank, attach the required documents, and submit to their evaluation and approval.
Remember that in the same deed of sale of the mortgaged property the subrogation of the mortgage is made.
Sale without mortgage subrogation
When selling without mortgage subrogation: if the mortgage debtor does not pay the debt, the creditor can foreclose even though the property belongs to someone else, and that other person is not the debtor.
Actions on the mortgage
The mortgage gives the mortgagee two actions: the mortgage and the personal, and in this case both always fall on the debtor, but when the house is sold without subrogating the mortgage, those two actions are separated and it may happen that:
- The mortgage action falls on the current buyer who owns the property, and the personal action on the seller, who is still the seller.
- But if the seller, after selling the house, does not pay the debt, the bank will pursue the property that is in the hands of the buyer, even though he owes nothing to the bank, and without the buyer being able to demand that the bank first pursue the debtor.
In conclusion, buying a mortgaged home without subrogation is a big risk that the buyer will have.
What should I take into account when buying a mortgaged house?
In the case of the person who decides to buy a house that is already mortgaged, they should know that when making the purchase process by mortgage transfer, they will not only receive the house but also the responsibility of finishing paying the bank the debt, so it is pertinent to evaluate the following aspects:
- The value of the property versus the mortgage credit: You must evaluate that the reward for buying a mortgaged house is that of obtaining a better price, even if you must pay the mortgage because if you are going to spend more you should choose a house without a mortgage.
- Pay the credit as soon as possible: If you have the possibility of making advance payments or credit advances once acquired, it is recommended that you do so since you will get out of debt faster and pay less interest. But verify that the bank does not charge penalties for it.
- The value of the property: It is well known that properties acquire value over time if they are kept in good condition, but they can also be depreciated if conditions have deteriorated a lot. That’s why evaluate as many home options as you can before choosing one.
- Payment of taxes: The house you buy must meet all legal requirements and the payment of taxes must be up to date so that you avoid problems in the future.
In summary, if a house is mortgaged, it is possible to sell it, although this must be revealed as a first detail by the seller, although it is also the responsibility of the buyer to verify everything related to the home you want to buy, since when buying a home that is mortgaged the legal process will be more complex and will also be the new person responsible for paying the debt. We recommend you keep in mind the tips given in this article and thus avoid taking risks.