3 steps you should know when applying for a second-hand house loan
When buying a new house in a newly launched project, applying for a mortgage with a bank may seem relatively easy. Project staff will assist with everything, from preparing the purchase and sale agreement to submitting the loan application on your behalf, meaning you rarely need to visit the bank yourself.
However, for those planning to buy a second-hand house with a mortgage, don't worry. While the process may not be as straightforward as with a new house, buyers can still manage the process.
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1. Agree on the Price with the Seller and Draft a Contract
Once you've chosen a suitable second-hand house, you'll need to contact the seller to finalize a purchase and sale agreement. This agreement must specify the agreed-upon price, the deposit amount, and the payment schedule for the remaining balance. The seller usually sets a timeframe for the final payment.
If the buyer fails to pay the remaining balance within the specified time, the seller has the right to retain the deposit. You can create your own purchase and sale agreement or use a standard template available for download online or purchased from a stationery store. Once the agreement is finalized, the seller must provide a copy of the land title deed to be used as supporting documentation for the loan application.
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2. Contact the bank to apply for a pre-owned house loan.
When applying for a pre-owned house loan with a bank, the buyer or borrower must prepare documents, including identification documents and financial documents showing the source of income, such as salary slips and bank statements. They must also submit the purchase and sale agreement and a copy of the land title deed obtained from the seller to the bank for property appraisal.
Typically, banks will provide a loan amount not exceeding 80% of the purchase price or the appraised value, whichever is lower. Therefore, the buyer should prepare at least 20% of the purchase price to pay the seller.
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3. Schedule a mortgage transfer at the Land Office.
After the house loan is approved by the bank, the buyer must inform the seller to schedule a date at the Land Office to transfer ownership of the house and mortgage it to the bank as collateral. The seller will receive the full payment on that day. This means that three parties – the buyer, the seller, and the bank – will be present at the Land Office to complete the transfer and mortgage on the same day.
On that day, various fees related to the house purchase and sale will be settled. The transfer of property ownership to the buyer and the mortgage of the property to the bank include specific business tax or stamp duty, transfer fees, and mortgage fees, which are payable to the land office.
The buyer and seller should agree on who will pay which expenses or how they will be divided between them on the day the purchase and sale agreement is made, such as splitting all expenses equally.
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Thank you for the helpful information from DD-Property.
