Maria and her husband Wolfgang bought a condominium a few years ago with the help of a loan. Maria has got a new job, which is why the couple is now moving to another city and wants to sell the flat. Can the couple sell the flat despite the current loan?
Are you in a similar situation and wondering who will continue to pay off the loan in such a case? How much of the sale price is the bank entitled to and how much money do you have left? I will answer all these questions in this blog post. So read on!
Selling a flat despite a current loan: Who takes over the loan payments?
If you want to sell your flat even though the loan for it has not yet been paid off, you have two options:
Option #1: Paying off the loan with the proceeds of the sale
If you sell the flat regularly, the buyer usually transfers the sales price to a trust account. The money stays there until the bureaucratic part of the sale - registration in the land register, notarisation of the purchase contract, etc. - is completed.
The trustee - a notary or lawyer - covers your outstanding liabilities or debts with this money. In this case, this includes the current loan from the bank.
As an example: Your outstanding loan is 150,000 euros. Through the sale, you collect 350,000 euros. The buyer transfers the sales price of 350,000 euros to the escrow account.
Your trustee transfers the remaining 150,000 euros to the bank where you took out your loan and your loan debts are thus paid off.
Option #2: Loan assumption by buyer
It happens again and again that buyers are willing to take over the seller's credit - the so-called assumption of debt occurs.
Note that the bank must agree to the buyer taking over the debt! To increase the likelihood of this, you should definitely check the creditworthiness of the buyer! The buyer must have at least the same credit rating as you. If this is worse, the credit default risk for the bank increases and a debtor switch is usually not approved.
How much will you have left from the sale price if you sell a flat with a current loan?
How much money you get from the sale depends on whether you have chosen to pay off the loan or have the buyer take over the loan.
Scenario 1: Repayment of the loan
If the flat was sold by means of a trust deposit, this covered the loan amount. The rest of the money will be transferred to your account.
Let's look at the example above again:
You have sold your flat for 350,000 euros. The trustee has covered the outstanding loan of 150,000 euros with the proceeds of the sale. The remaining 200,000 euros will be transferred to your account.
Please note: Depending on your credit model, additional costs may be incurred for early repayment of the loan!
In addition: Pay attention to the provision in the purchase contract regarding the assumption of costs for the release from encumbrances. The lawyer or notary has to arrange for the deletion of the debts for the land register entry, which incurs costs for the work as well as for the repayment with the authorities. Who bears these costs must be specified in the purchase contract.
Scenario 2: Loan assumption by the buyer
Once you have agreed with the buyer that he or she will take over the loan, the adjusted sales price will be transferred to you.
In this case, you must in any case make sure that the correct sales price is stated in the sales contract. It must be made clear in the contract that the buyer will take over the credit and therefore the sales price will be correspondingly lower.
Conclusion: Selling a flat despite a current loan? Yes, but only with the right advice!
If you want to sell your flat despite a current loan, it is advisable to seek the assistance of an expert.
If you are not careful, you may be faced with high costs due to early loan repayment. Or you may forget to include the provision for the assumption of costs for the release from encumbrances in the purchase contract, which will also cost you money.
If you need assistance for your flat sale, we at Arealita can assist you as real estate agents in Tyrol and court experts in reviewing your documents.
If you have any questions about selling a condominium despite a current loan, you can of course also contact us at any time by telephone(+ 43 512 580 242), via e-mail(immobilien@arealita.at) or by using our contact form.
With kind regards
Yours, Bernhard Großruck
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My name is Bernhard Großruck. I work as a real estate agent and appraiser in Innsbruck and would like to give you helpful tips about real estate in this blog.