How to Sell an Apartment with a Mortgage
What is a Mortgage?
A mortgage is a loan issued against real estate collateral. Practically, this means that when applying for, for example, a housing loan, a bank or other financial institution provides money, but the mortgaged property serves as a guarantee for loan repayment. If the borrower doesn't repay the loan, the lender can sell the property with the help of a bailiff and thus recover the unpaid amount.
Selling an Apartment with a Mortgage
Selling real estate with a mortgage is a common practice in Latvia, and such transactions happen daily. A three-party agreement is concluded, involving the buyer, seller, seller's bank, and if the buyer purchases with bank financing, then also a fourth party – the buyer's bank. In this case, it's more convenient to arrange everything through a transaction account, where all parties sign regarding the transaction process.
Example: Transaction with Transaction Account
Let's look at a practical situation:
The transaction account agreement will specify that the buyer must deposit 100,000 EUR into the transaction account, of which 20,000 will be their own and the rest from the bank.
When the seller's bank sees that this amount is in the transaction account, it will submit its mortgage deletion to the land register. Usually, in parallel with this, the buyer has already been to the notary and submits to the land register:
At that moment, all documents will be submitted, and when everything is confirmed in the land register, the final result will be:
Transaction Without Transaction Account
In such cases, you can also manage without a transaction account, but this must always be coordinated with the bank. Banks increasingly rarely allow avoiding the transaction account, as it is still additional security and profit for banks.
Conclusion
Selling an apartment with a mortgage is possible and frequently practiced. The most important thing is proper preparation, timely communication with the bank, and comprehensive documentation. It's always better to coordinate the transaction account or other solutions with the bank involved in the entire process so that the transaction proceeds smoothly and without unexpected circumstances.