how to sell Home with mortgage

how to sell Home with mortgage

Sometimes sellers think that it is impossible to sell a home with mortgage. this is not so. When buying, the bank will take the property as collateral. You can sell such an apartment, but you will need to secure the permission of the bank. Consider the main options for selling a   home with mortgage.

How to sell a home with mortgage

Option 1. Pay off the mortgage ahead of schedule

Paying off the loan early is the best option for all parties. Some buyers may be deterred by the burden of the bank, since such transactions are more difficult to conduct. Most likely you will have to spend more time on the sale or lose money.

How to get your mortgage approved

You can pay off the rest of the mortgage with your own money or take another loan, for example, a consumer loan. This scheme will work if the seller has savings to pay off the balance or enough income to take out a new loan.

If the balance is small, you can try to negotiate with the buyer to transfer in advance the amount necessary to pay off the debt. In practice, buyers are reluctant to make such transactions: they will have to give money against a receipt and hope for the honesty of the seller. If the seller refuses to sell the apartment and return the money, you will have to go to court. Even if the buyer wins the case, it does not guarantee that he will get his money back right away.

Usually, if buyers agree to such deals, they ask for a significant discount.

Option 2. Contact the bank

The buyer repays your loan, the bank removes the encumbrance from the apartment and after the apartment is sold under a contract of sale.

The main difference from the first option is that the bank takes part in the transaction and insures the buyer. The buyer transfers money directly to the bank, and not to the seller. Risks become less and buyers are more willing to agree to such conditions. But not all banks are ready to go for it. Before starting the sale, you should contact the bank and find out the scheme for selling a home with mortgaged.

If the bank agrees to the transaction, the buyer deposits money and repays the seller’s debt. The buyer pays the remaining difference between the sale price and the balance of the debt to the seller. To do this, the buyer puts the amount of the difference in a safe deposit box or opens a letter of credit. This can be done at the lender’s bank or any other bank. The seller will receive the money when the buyer registers the contract of sale of the apartment and the ownership passes to him. To confirm that the ownership has passed to the new owner and you can receive money using an extract from the USRN.

As soon as the bank receives the money to pay off the mortgage, it will issue a certificate of repayment of the debt and transfer the mortgage on the apartment so that the seller can remove the encumbrance on his own. Sometimes banks themselves report to Rosreestr and send a package of documents to remove the encumbrance.

Often, a preliminary contract is concluded first. The seller and the buyer prescribe the terms of the future main contract of sale: the cost of the apartment, the amount of the advance, the responsibility of the parties.

After Rosreestr removes the encumbrance, they sign the main contract of sale and register the transfer of rights from the seller to the buyer.

Option 3. Renew the mortgage to a new owner

In this case, the apartment is sold simultaneously with the loan. The seller’s mortgage is reissued to the buyer along with the apartment. In practice, it is difficult to conduct a deal on such conditions.

For the transaction to take place, not only the buyer’s consent to such conditions is necessary, but also the bank’s consent to take the buyer as a new borrower. If the buyer agrees, and the bank has approved the required amount, a tripartite agreement is concluded to transfer the mortgage loan debt from the seller to the buyer.

The buyer assumes the obligations of the seller under the mortgage: the balance of the debt and interest. In this option, the encumbrance from the apartment is not removed.

After that, a sale and purchase agreement is concluded and the bank signs a loan agreement with the new owner. In addition to registering the transfer of ownership, you will need to make changes to the mortgage record and change the mortgagor.

Do I need to pay tax?

If income arises from the sale of an home, it will need to be declared and personal income tax paid.

If the home has been owned for more than five years, you do not need to pay tax.

There are several options to reduce the tax on the sale of our home You can receive a deduction in the amount or reduce tax by the amount of expenses actually incurred.

We do not recommend underestimating the value of the apartment under the contract of sale. The tax office looks not only at the amount of the transaction in the contract, but also at the cadastral value of the apartment. If the sale price is less than the cadastral value, the tax office considers personal income tax from the cadastral value multiplied by a factor of 0.7.


  1. You can sell a apartment with mortgage, but you should get permission from the bank
    The best option is to pay off your mortgage early.
  2. If early repayment will be at the expense of the buyer, be prepared to give a risk discount.
    Often, when dealing apartments with mortgage, a preliminary agreement is concluded. And after the Rosreestr removed the encumbrance of the main one.
  3. To sell an apartment together with a mortgage, not only the consent of the buyer is required, but also the consent of the bank to take the buyer as a new borrower.


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