Purchase of mortgaged property
How does the purchase of a mortgaged property take place? What are the advantages and disadvantages of buying such a property? What are the pitfalls, what should you pay attention to?
I will address these questions in this article, as many people are unsure about buying a home with a mortgage - and the seller's side is afraid that they will not buy your property because of this (or only after a very long time).
Sale and purchase of mortgaged real estate
The process is regulated by law, so there is no need to be afraid of loopholes or pitfalls - the sale of the mortgaged property can help cover the debts, and the purchase price is reduced by the paid burdens, so it does not cost more.
Moreover, since the seller's side often wants to get money quickly to settle the debts as soon as possible, a property with a mortgage registered on it may even be cheaper.
Loads such as
- mortgage,
- CSOK,
- usufruct, life annuity and other due diligence rights
they do not prevent the sale and purchase of a property.
However, there are also registered encumbrances on the property, such as, for example
- the auction
- or the right of first refusal,
for which the bank does not provide a loan amount, so they can only be paid on your own for a successful credit assessment. It is good to know that the banks control the sale and purchase process even more strictly if the seller and the buyer are close relatives, since in many cases this can give rise to suspicion of abuse (so that the buyer can get rid of his bad credit).
The encumbrances can be found on the property's title page (details in my blog article Documents required for the sale of the property).
It is important that, in addition to the encumbrances registered on the title deed, the buyer also checks the utility debts, since this cannot be replaced with a loan either, but must be covered by one's own resources.
Sale of mortgaged property to settle the debt
Whose task is it to balance the burdens? If the seller has the necessary amount at his disposal, he can sell his property free of charge - in most cases, however, the seller does not have that much money, so it will be up to the buyer to terminate the mortgage.
Very rarely, it may also happen that there is just enough of the mortgage left that the seller can cover it with the deposit.
The process of buying a non-encumbered property
What does the whole process look like?
- The owner relieves the property: he informs the bank that he would like to pay it off, and the bank prepares a calculation, which the owner pays.
- If this is not possible, the buyer pays the amount calculated by the bank - and the purchase price of the property is reduced with this amount. What is certain is that if, as a customer, we immediately transfer to the bank and we ourselves pay the final installment amount!
- A few days after receiving the money, the bank will issue a cancellation statement, which must be submitted to the land registry in order to remove the mortgage from the title deed.
- The remaining part of the purchase price is then paid by the buyer.
- The property will become the property of the buyer within 30 days after the signing of the declaration of sale.
Donation of mortgaged real estate
Another common question is whether it is possible to gift a mortgaged property?
The answer here depends entirely on the credit institution - i.e. the bank's consent is required for the gift to take place (with a gift contract drawn up by a lawyer). Most of the time, banks establish a prohibition on alienation and encumbrance on real estate with a loan and prevent its gifting.
Conclusion: is it worth buying a mortgaged property?
Buying a mortgage-encumbered property is a slightly longer process than buying an unencumbered apartment, but it is risk-free due to legal regulations. Today, every second property in Hungary is purchased with a mortgage registration, which is why the banks also have strict and detailed regulations for handling the matter.
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