Sale of a mortgage property and financed by the same bank

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There will be cases where the property being purchased belongs in all these situation…

  • Mortgaged in a bank
  • The seller doesnt is not liquid enough to pay out the mortgage even after receiving equity down payment from the buyer. Or for some reason, the seller doesn’t want to make huge cash out.
  • The buyer will also need to apply a home loan from a bank to finance the property.

 

In this scenario, the best approach is for the buyer to apply financing to the same bank where the property is mortgaged. We’ve only tried this in BDO so if the property is mortgaged in BDO, you are in luck.

Here’s are the steps to be taken by the seller and buyer

  1. Agree on a purchase price. An “Offer to Purchase” letter, signed by both parties will formalize the price agreement and terms of payment.
  2. Buyer to pay earnest money to the Seller. This will serve a as reservation fee and the Seller can no longer accept other offers after receiving the earnest money. This is refundable if the buyer didn’t get approved for a bank loan.
  3. Buyer to starts loan application.
    1. Submit loan application requirements
    2. Bank will appraise the collateral property (appraisal fee will cost between Php3K to Php4K)
    3. Loan Approval
    4. Signing of Promissory note / Loan Documents.
  4. Meeting with seller and buyer for signing of Contract to sell and settlement of equity/down payment.
  5. Three weeks after item 3.4 the Letter of Guarantee (LOG) from the bank will be ready. This is the seller’s assurance that the balance of the selling price will be paid by the bank.
  6. Now that the LOG is ready, buyer and seller may now proceed in signing of Deed of Absolute Sale.
  7. Bank can now start processing the title transfer. Following documents will be submitted to the bank.
    1. Signed Deed of Absolute Sale
    2. Certified true copy of CCT and Tax Dec
  8. Once the title is transferred to the buyer’s name, the approved loan amount will be used to pay the mortgage balance and any remaining amount will be given to the seller. By the way, there’s around 4 months lead time between item 7 and item 8.

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