Ready to Move On? Selling Your Home with an Incomplete Mortgage

Many home sellers often wonder if they can sell a house that still has an unfinished mortgage. They're unsure if it's possible to sell a property with unfinished mortgage payments. This uncertainty might stem from not knowing the steps involved in such a situation.

If you own a home and are considering selling it, you might have concerns. You might be making mortgage payments to the bank, or you've used the house as collateral for a loan. But don't stress too much. The situation isn't as limiting as you may believe. In this article, we'll delve into how you can sell a house that still has an unfinished mortgage. This way, you'll get a better idea of what to expect.

Types of Homes with Unfinished Mortgage Payments

As a homeowner, it's important to grasp the obligations tied to your house. These fall into two main categories. Homes with bank mortgage and homes used as collateral for loans.

Homes with bank mortgage

Homes with bank mortgages are between payment and aren't transferred to new owners. This category also includes homes used as collateral for loans. Properties pledged for mortgage agreements or loans backed by the property itself. This means using the property as security to get loans from banks. All this is overseen and regulated by the Bank of Thailand.

Homes Used as collateral for loans

Homes under collateral are much like mortgages from banks. This includes using the property and land as security for loans. It can involve individuals, companies, or investors. Unlike banks, these people or groups aren't institutions under the Bank of Thailand.

The Steps in Selling a house with Unfinished Mortgage Payments

Once you see the types of homes that are between payment, you'll see that people can sell these properties. Yet, the payments should connect to financial institutions. Also, homeowners must pay any debts still owed must before the ownership transfer. When you've understood, let's now see the steps needed when selling a house with a mortgage payment.

The Sales and Purchase Agreement

When selling a house with an ongoing mortgage, the process of making an agreement is like a regular sale. This means putting down a deposit and reserving the property. The last step is finalizing the agreement between the buyer and the seller. They also have to talk about sharing different costs. It's crucial to tell the buyer that the house still has an unpaid mortgage or collateral attached to it. But don't worry, you can sort out these obligations on the day the ownership transfer date.

Prepare Documents and Arrange for property appraisal

The next step is for buyers who are purchasing the property without cash. The homeowner must provide a copy of the land title deed along with mortgage documents to the buyer. It is mandatory for the buyer to apply for a loan from a bank. Additionally, the homeowner needs to allow the bank to appraise the property's value.

Schedule Ownership Transfer Date

This is when the buyer is ready to pay or has received approval for a home loan. The next step is setting a date for transferring property ownership. This arrangement happens between the buyer, homeowner, or bank. They arrange a specific date and time, which impacts the interest rate on the remaining debt.

Contacting the Financial Institution

Once the date is set, contact the financial institution linked to the property. This is to inform them about the upcoming sale and request debt closure. They also provide the bank with the transfer date. If the date remains the same, the bank will give details on closing the account balance until that date.

Payment Division

The homeowner must clarify the payment division to settle the debt with the buyer's bank. This involves specifying the amount for the mortgage and the sum for the homeowner. If the price is lower than the remaining debt, the homeowner needs to have extra money for the mortgage.

Contact the Land Office

The last step is transferring ownership at the Land Office. This includes the seller, the seller's bank, the buyer, and the buyer's bank. They must all go through financial documents and paperwork. The seller's bank clears the mortgage and then transfers ownership to the buyer. The buyer's bank registers the mortgage for the buyer. This marks the successful completion of selling the house with unfinished payments.

What to be aware of in selling a property with unfinished mortgage payment

Pre-transferred expenses

Besides transfer fees, the seller needs to tell the buyer to prepare a cashier's check. The buyer needs to address the check to a separate bank account of the seller. They also need to mention the recipient's name. The check should have crossing marks to ensure that the money goes only to the specified account. Before the ownership transfer date, the seller should ask for a copy of the check.

List of Transfer expenses

• Transfer Fee- 2% of the appraised value, divided at 1% each for the buyer and the seller.
• Specific Business Tax- 3.3% of the sales price.
• Stamp Duty- 0.5% of the sales price.
• Mortgage Registration Fee- 1% of the total loan amount.

Debt is higher than the Sales Price

The homeowner should ensure that the sales price covers their debt. If the debt is higher than the sales price, the seller needs extra money to pay off the debt during transfer. If not, the bank can't clear the mortgage, causing problems for the buyer.

Buyers not understanding the buying process

Sellers knowing how to sell a house with a bank mortgage is one thing. Yet, many keen buyers don't understand the process for a mortgaged house. Their hesitation is when they realize the collateralized house is what they're buying. Hence, sellers must make it clear that a house with a bank mortgage is still purchasable. They should also assist buyers by guiding them through the essential steps.

Read More:

Getting a Mortgage in Thailand as a Foreigner

Getting approved for a mortgage in Thailand is not outright impossible for foreigners but still difficult. Each lending institution will have their varying degrees of requirements or terms and conditions.

Most lending institutions will need at least a one-year work permit and an employer's letter regarding your salary and length of service to the company in Thailand. UOB offers international property loans to various countries as do some other Thai banks. Other Thai banks also offer mortgages to foreigners married to a Thai spouse. Do bear in mind, though, that you will not have full property ownership rights due to the property being bought under the name of your Thai spouse.

You also have the option of MBK Guarantee, though this will require prior ownership of a Thai property to finance another property. Fortunately, MBK Guarantee does not have restrictions on nationality, nor do they require a work permit or Thai spouse marriage.

For more information, read these articles:

Closing Comments

The main point of this article is about selling a house with a mortgage still needs payment – a house with a bank loan. Homeowners who owe money on their houses might worry they can't sell them yet. But actually, selling such a house is quite simple. Most banks allow homeowners to sell a house with a mortgage. This is as long as they use the buyer's money to pay off the debt before transferring ownership.

Selling a house with an mortgage is possible if the homeowner uses the sale money to clear the mortgage. Once that's done, the ownership can transfer to the buyer. This completes the selling process.

Looking to sell a house with an unfinished mortgage? Feel free to get in touch with us. Our property consultant team will be very happy to help answer your questions

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