Auctioned Property Financing Options: Loans And Mortgage Considerations – As a home owner, what happens to the proceeds when you have sold your home? Do you have to pay back your savings spent on accommodation? Find out more.

Do you want to repay your housing savings when you sell your home? Find the answer to this and other common questions related to selling your property.

Auctioned Property Financing Options: Loans And Mortgage Considerations

Most home sellers expect to make money when they unload their property in a strong market. But many may not realize that after paying off their mortgage, all of the remaining sale proceeds may not be available to them as cash that they can use right away.

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Those who used their savings to buy their property must repay the capital raised, along with accrued interest, into their account after they sell. Any housing allowance received and accrued interest must also be returned to their regular account. If the grant amount to be refunded is more than $30,000, part of this can be credited to the seller’s special account/retirement account and MediSave account.

As the savings are intended for your retirement needs, any funds used to buy property will reduce the amount available for your retirement. This is why you must repay the amount spent plus the accrued interest on this amount when you sell your home.

Any amount you repay can then be used to finance your next home or retirement. To help you better plan your finances, here are answers to some common questions about what happens to the sale proceeds after you sell your home.

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Yes. If you have hired yours to pay off or service your home loan, you must repay the principal you have taken from your account, along with the accrued interest. This amount of interest is equal to what you would have earned if you had kept the money in your account.

The refunded amount will be used to top up your payout account to your full payout amount. Any balance repayment in excess of the full withdrawal amount will be paid to you in cash. You can log into the website with your Singpass to find out exactly how much you have to pay back when you sell your property.

All home sellers must repay the raised principal for the home together with accrued interest. However, if you are 55 or older and have mortgaged your property to cash out your retirement account savings, you must repay the mortgaged amount together with the principal withdrawn and accrued interest.

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When you sell your apartment, you must also repay the housing benefit you receive, plus accrued interest. The Housing Benefit refund will normally be returned to your regular account. However, if you have received more than $30,000 in grants, part of this amount can be credited to your special account/retirement account and MediSave account. These funds can then be used for your health and pension needs under the various approved schemes.

If the sales price after paying off your outstanding home loan is not enough to cover the required repayment, you do not need to increase the shortfall in cash if you sold the property at market value.

However, any option money (such as an option fee or option exercise fee) that you received from the cash buyer when you sold your property is considered part of the sale price. As such, this amount must also be credited back to your account before the transaction can be completed.

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The order in which your sale proceeds are distributed depends on the type of property being sold and when it was purchased or refinanced.

If you bought or refinanced a private property on or after 1 September 2002, or you bought an HDB flat, the amount refunded will be divided between your and your co-owner’s accounts in the following ratio:

For private properties purchased before September 1, 2002 and not refinanced thereafter, you can find out more about the distribution of refunds.

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If you sell a private property within three years of buying it, you must pay Seller’s Stamp Duty (SSD). This is set at 12%, 8% and 4% of the property value for homes sold in the first, second and third year respectively after purchase.

If you used an agent to sell your property, you must pay a commission, which is usually 1% to 2% of the sale price. You also need to consider other miscellaneous costs related to the transaction, such as administration fees (which can vary from $40-$80 for HDB flats depending on the flat type) and legal fees (for an HDB flat sold for $500,000, the legal fees paid by the seller may it varies from $280-$300 depending on the flat type). Exclusive offer for non-professional users: Check your credit score and get professional at no cost!

Your bank may auction your property if you default on EMIsOn August 20, Bank of Baroda issued a public notice that Bollywood actor Sunny Deol had unpaid dues on loans taken by him. The notice was later withdrawn, but the banks and lending institutions aim to recover their outstanding dues by seizing the defaulter’s property and auctioning it in accordance with the SARFAESI Act of 2002.

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Earlier this week famous Bollywood actor Sunny Deol was in the news for reasons other than this blockbuster,

. On August 20, Bank of Baroda issued a mandatory public notice in prominent newspapers to recover outstanding dues of around Rs 56 crore. Deol had taken a loan to keep this property as security or mortgage in the bank. The bank invoked the SARFAESI Act to recover the outstanding dues. The notice was subsequently withdrawn, allegedly following the plaintiff’s undertaking to the bank to pay the dues.

Let’s examine the circumstances under which a bank can auction your property, the process involved, and your rights as a borrower even if you default.

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The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests Act (Sarfaesi Act), 2002 was enacted to help banks and lending institutions to recover their rights from the defaulting borrower. Under the law, when the borrower fails to repay the loan, the lender can take control of the assets assigned as security for the loan without the intervention of a court. When the lender acquires the property, it can sell, lease or transfer the rights to the property to another entity. After the sale of the property, the lending institution retains the outstanding rights and gives the remaining money, if any, to the defaulting borrower.

The initiation of the auction process happens when the borrower defaults on the equalized monthly installment (EMI). “If a loan EMI remains unpaid for more than 30 days, it is categorized as ‘Special Mention Account (SMA) 1’. If this non-payment continues for more than 60 days, it is termed as ‘SMA 2’. If EMIs remain unpaid for more than 90 days, the account will be considered a non-performing asset (NPA),” said Naresh Malhotra, a former senior State Bank of India (SBI) official who is currently engaged as a banking adviser.

Keep in mind that when a lender categorizes a loan or overdraft (OD) account as SMA or NPA, this information is shared with credit bureaus like Experian, CRIF and CIBIL. As a result, the credit scores of both borrowers and guarantors are negatively affected.

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A formal claim is then raised against the borrower. In the absence of a satisfactory response, a legal notice may be issued. “Typically, banks convey this through the relationship or branch manager. If there is no satisfactory response, a legal notice is sent through a lawyer within two to four weeks of the formal communication,” Malhotra added.

However, in cases where a real liquidity challenge arises for the borrower, who then provides the necessary details to resolve the issue, bankers may extend additional time to facilitate the adjustment of payments.

However, if the borrower does not respond even after the legal notice, the bank or financial institution can proceed with the recovery of its rights by taking possession of the mortgaged property. “The process often begins with a notice under Section 13(2) of the SARFAESI Act which means symbolic possession. The subsequent act of obtaining physical possession under Section 13(4) of the SARFAESI is done after – appropriate court intervention,” Malhotra said.

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Once actual possession of the property is secured by the lender, the bank attaches a notice to the property indicating its ownership. In addition, a public notice is published in at least two prominent newspapers announcing the auction of the property on a specified date. This notice also invites objections or requests from the public about the property with 14 days to respond from the date.

Before proceeding with the auction process, the bank must have the property appraised by a registered expert valuer to set a reserve price for the asset, Malhotra explained. The assessment process here is

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