Kumari Palany & Co

Can house property purchased through loan be given to heirs?

Posted on: 18/Aug/2014 5:58:48 PM
Now-a-days, most people buy or build a house only after taking a loan.They pay EMI (Equated Monthly Installments) for 20 to 25 years every month.

So, the loan on the house remains over this long period.

In this condition, can the buyer, while writing his ‘will’, pass on to his/her heirs?

If you refer this question to the bank, the answer will be ‘No’ in all possibilities.

However, there are legal procedures to make this possible is per banking experts.

As a first step, the house buyer will have to write a letter to the loaning bank about his/her intent. 

He/she also will have to give a guarantee that this will not affect the bank in any manner. He/she should obtain NOC (No Objection Certificate) from the loaning bank. This will make the heir responsible for any balance payments, in case anything happens to the buyer.

The heir will also become a debtor to the bank. If this is legalized, the ownership will automatically pass on to the nominated heir. However, most banks do not come forward to follow this procedure.

The question may arise why the banks refuse to accept the will to pass on the house to the nominated heirs?’. There are many reasons. Firstly, the procedure is long-wound. The banks will also consider the possibility that the buyer may not anymore be responsible for repayment of the housing loan taken. Also, they would be wary about any unforeseen problems that may arise during this long loan repayment period.

With all these considerations, most banks reject such requests immediately. However, the procedure explained is legal.

There is another approach to this issue – what happens when the buyer dies with loans unpaid?  The banks, anyway, will have to approach the heirs for the balance payment. So, there is not much difference between the legal procedure suggested above and this possibility.