Hi all,
I’m selling one of my investment properties to fund the development of 3 townhouses on another block of land I have. I’ve never sold before so I have a couple of questions. Do I have to inform the bank that I am selling the property that they have a mortgage over? Can I retain the loan I already have and use it to fund the development. These may seem like silly questions but I really don’t know the answers.
TIA
TrishHi Trish
Yes you will need to notify the lender and also sign a Discharge authority.
Some lenders may require 3 weeks notice so i would do it soon as possible.
You might find your lender allows a security substitution but more likely you will have to discharge the loan in full and then make a totally separate application for the new funds. This will be assessed on its own merits.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Yep as Richard says. You won’t be able to settle while there is a mortgage on the property so you will have to arrange the discharge. To discharge the mortgage you will need to repay the loan that it is securing – or to give other security for the loan.
Before you sell just make sure you will be able to borrow again because things have tightened up so much many people find themselves unable to qualify for what they currently have in terms of loans.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Yep as Richard says. You won’t be able to settle while there is a mortgage on the property so you will have to arrange the discharge. To discharge the mortgage you will need to repay the loan that it is securing – or to give other security for the loan.
Before you sell just make sure you will be able to borrow again because things have tightened up so much many people find themselves unable to qualify for what they currently have in terms of loans.Thanks Terry. Can I assume that repaying the loan all happens as part of settlement?
TrishHi Trish
Yes you will need to notify the lender and also sign a Discharge authority.
Some lenders may require 3 weeks notice so i would do it soon as possible.
You might find your lender allows a security substitution but more likely you will have to discharge the loan in full and then make a totally separate application for the new funds. This will be assessed on its own merits.
Cheers
Yours in FinanceThanks for your help Richard.
TrishHi Trish
Your solicitor will arrange for the loan to be paid out at settlement unless you instruct otherwise (and have altneratives arranged with the mortgagee).
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
You may need to consider other securities, if any, that may be cross collaterlised with the IP you are intending to sell as bank will do vals on them.
If the vals dont come back as expected you may be forced to reduce loan amounts on any related securities. This is usually discovered at settlement and can hold up the process. If no other properties involved then should be ok.
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This reply was modified 7 years, 7 months ago by
Colin Rice.
Colin Rice | CDR Finance
http://cdrfinance.com.au/
Email Me | Phone MePerth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]
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This reply was modified 7 years, 7 months ago by
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