How to sell an apartment with a mortgage?

Currently, there have been many not very positive changes in the real estate market. Evidence of this is the increase in mortgage debt. There are more and more cases when the borrower becomes unable to pay for the mortgage. In this case, one way out of the situation is to sell the mortgaged apartment. What options does the borrower have for the development of events?

Contacting the bank

If a person is unable to make a payment on a mortgage loan, then the first thing he needs to do is notify the bank that issued the loan. If the situation is not dire, then the bank may offer the client a loan restructuring, that is, a change in the terms of the mortgage loan. For example, the bank may offer the borrower to increase the payment terms for loan installments.

If restructuring cannot solve the problem, then it is necessary to sell the mortgaged property.

Sale of an apartment by court decision

The situation of selling an apartment by a court decision may arise when the borrower delays loan payments according to the established schedule or does not pay loan installments at all. This case is the most unfavorable for the borrower, because the court independently handles the sale. He himself determines the initial cost of the home based on the amount of the borrower’s debt, and then puts the home up for auction. The borrower has the opportunity to increase the initial cost of the apartment once at an auction, however, if the housing is not sold, then at the second auction its initial cost will be 10% less.

In the event that the housing is not sold as a result of the auction, the bank independently buys the apartment into its own ownership. In this case, the cost of housing is reduced by 25% of the original cost. Simply put, this money will only be enough to pay off the resulting debt.

Tripartite contract for the purchase and sale of housing

If it is possible to resolve the issue with the bank peacefully (that is, not through the court), then most often a tripartite transaction scheme is used, the participants of which are the buyer, the owner of the apartment (borrower) and the bank. In this case, the first step is to notify the bank that a decision has been made to sell the collateral real estate. As a rule, if there are no problems with the client, the lender agrees to this procedure without any problems. The bank must give its consent to the sale of the home. The buyer must pay the borrower’s debt to the bank before signing the contract, since formally the property is still collateral.

The borrower can search for a buyer for the home either on his own or through a real estate agency. If a person is confident in his abilities, then he can find a buyer on his own, however, in order not to waste time and not risk bringing the matter to court, it is best to seek help from a realtor. On the first day after contacting, the realtor will offer several options from which the seller can choose the most suitable one. After a buyer has been found, it is necessary to conclude a deposit agreement. The deposit will be the amount of the borrower’s debt to the bank. It is best to have the deposit agreement certified by a notary. It must contain the obligations of the seller, the cost of the apartment and the payment procedure, as well as the deadline for removing the encumbrance from the housing. After this, you need to visit the bank and pay the debt, after which documents are issued that confirm the absence of debt and a mortgage on the property.

The next step is a visit, together with a bank representative, to the registration chamber, where the encumbrance is removed from the property. Only after this the seller and buyer can enter into a purchase and sale agreement. The seller ultimately receives the difference between the cost of the apartment and the amount of debt to the bank.

What will the borrower lose if the mortgaged apartment is sold?

In most cases, the borrower will only lose the amount of interest that he paid during the payment period under the loan agreement. As a rule, the loan agreement provides for the payment of most interest in the early years, so the borrower will lose more money if the mortgage payments were made more than half of the term.

There have been cases when the borrower remained in the black after selling the property. This happens when housing has increased in price in the real estate market.


A good alternative to selling a mortgaged apartment is to exchange it for a smaller apartment. To do this, you need to remove the encumbered apartment and buy cheaper housing with a mortgage. Perhaps the difference between the cost of the former apartment and the debt to the bank will be enough to purchase a new home.

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