"The Original Is With the Bank": Buying a Mortgaged Flat in Bengaluru

The seller of a Bengaluru flat can show you a certified copy of the sale deed, but not the original. The original, they say, is "with the bank." That sentence suggests the property may be securing a loan, and if so, it changes what must happen before and at registration. The Transfer of Property Act, 1882 explains what a mortgage is, why an earlier mortgage outranks your later purchase, and how the seller's right to redeem is the route to a clean title.

This guide reads Sections 48, 56, 58, 59, 59A and 60 from a buyer's side. It is general information on a central law, not advice on any specific property or loan.

The short answer. A mortgage under Section 58 is a transfer of an interest in specific immovable property to secure a loan or debt. Under Section 48, a right created earlier generally prevails over a later one, so a buyer takes subject to an existing mortgage unless it is discharged. Section 60 gives the mortgagor the right, on paying the mortgage money, to get back the mortgage deed and title documents and a reconveyance or registered acknowledgement, and Section 59A extends that right to persons deriving title from the mortgagor. The trade-off: paying the lender directly at closing can turn a mortgaged flat into a clean purchase, but only if the release paperwork is collected and, where needed, registered.

What counts as a mortgage on a flat you want to buy?

More than a home loan document. Section 58(a) defines a mortgage as "the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability."

The Act names several forms. A simple mortgage under Section 58(b) leaves possession with the owner, who binds themselves personally to pay. A mortgage by conditional sale under 58(c) is an ostensible sale with a condition for reversal on payment, but the proviso says it is not a mortgage "unless the condition is embodied in the document which effects or purports to effect the sale." A usufructuary mortgage under 58(d) gives the lender possession and rents. An English mortgage under 58(e) transfers the property absolutely with a promise to re-transfer.

Two of these forms matter when reading a title chain. A deed in the chain that looks like a sale but carries a condition for reconveyance on repayment may be a mortgage by conditional sale, not an outright sale. And if a lender is in possession under a usufructuary mortgage, Section 60(b) says possession must be delivered back on redemption, so check who is actually occupying the flat.

Section 58(f) describes a mortgage by deposit of title deeds, where a person "delivers to a creditor or his agent documents of title to immoveable property, with intent to create a security thereon," in Calcutta, Madras and Bombay and in any other town the State Government notifies. Whether a particular Bengaluru property falls within a notified town is a point for your lawyer, but missing originals are always a reason to ask who holds them and why.

Does an existing mortgage bind you after you buy?

It can. Section 48 says that where a person creates rights in the same property at different times, and those rights cannot all exist together, "each later created right shall, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created." A mortgage created before your purchase is an earlier right.

That is why a sale "free from encumbrances" depends on the mortgage actually being discharged. Our guide to a resale seller's duties under Section 55 explains that, by default, the seller must discharge encumbrances unless the property is sold subject to them, and that the buyer may retain the encumbrance amount from the price and pay it to the person entitled.

How does a seller clear the mortgage before you buy?

By redeeming it. Section 60 says that once the principal money has become due, the mortgagor, "on payment or tender, at a proper time and place, of the mortgage-money," can require the mortgagee to deliver "the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee," deliver possession if the mortgagee holds it, and, at the mortgagor's cost, re-transfer the property or "execute and (where the mortgage has been effected by a registered instrument) to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished."

For a buyer, the practical sequence is to get the lender's outstanding amount in writing, pay it directly to the lender at or before closing, and collect the original documents and the release paperwork. Where the mortgage was by registered instrument, ask for the registered acknowledgement of discharge. Section 60 also preserves any term entitling the mortgagee to "reasonable notice before payment or tender" where the time fixed for payment has passed or no time was fixed, so ask the lender early about its notice and closure process. Our guide to resale flats with the seller's home loan outstanding covers the lender's timelines for returning documents.

Can you redeem the mortgage yourself after buying?

The Act contemplates it. Section 59A says that "unless otherwise expressly provided, references in this Chapter to mortgagors and mortgagees shall be deemed to include references to persons deriving title from them respectively." A buyer who takes the property from the mortgagor derives title from the mortgagor and so steps into the mortgagor's right to redeem.

That is a fallback, not a plan. Buying first and redeeming later leaves you dealing with someone else's lender, and the right under Section 60 applies only where it "has not been extinguished by act of the parties or by decree of a Court." Clear the mortgage at closing whenever you can.

What if the seller mortgaged several properties together?

Section 56 offers a buyer some protection. It says that if the owner of two or more properties mortgages them to one person and then sells one or more to another, the buyer is, absent a contract to the contrary, "entitled to have the mortgage-debt satisfied out of the property or properties not sold to him, so far as the same will extend." This is called marshalling.

The protection has limits: it applies "not so as to prejudice the rights of the mortgagee or persons claiming under him or any other person who has for consideration acquired an interest in any of the properties." The lender can still enforce its security, so do not treat Section 56 as a substitute for discharge. Ask the lender in writing whether it will release your flat from the common security on payment of an agreed amount, and get that release documented.

What should a Bengaluru buyer check for an existing mortgage?

Start with the originals and the encumbrance record. Use this list with your lawyer:

1. Ask where the original title deeds are, and get the holder's written confirmation.
2. Run an encumbrance search and look for any registered mortgage or charge.
3. Get the lender's letter stating the outstanding amount and the documents it holds.
4. Agree in the sale agreement that the price will first pay off the lender directly.
5. At closing, collect the original deeds and the lender's release or discharge letter.
6. Where the mortgage was registered, obtain the registered acknowledgement of discharge.
7. Check whether the seller's loan also covered other properties, and how the lender will release yours.

Frequently asked questions

Does an existing mortgage bind a buyer of the property?

Section 48 of the Transfer of Property Act says later rights over the same property are subject to rights created earlier, unless a special contract or reservation binds the earlier transferees. An existing mortgage is an earlier right, so it should be discharged at or before the sale.

What must a lender return when a mortgage is paid off?

Under Section 60, on payment or tender of the mortgage money, the mortgagor can require the mortgagee to deliver the mortgage deed and all documents relating to the property in its possession or power, deliver any possession held, and re-transfer or execute a written acknowledgement of extinguishment.

Can a buyer redeem the seller's mortgage after purchase?

Section 59A says references to mortgagors include persons deriving title from them, so a buyer from the mortgagor generally steps into the right to redeem. The right applies only if it has not been extinguished by act of the parties or a court decree, so clearing it at closing is safer.

Does a mortgage need to be registered?

Section 59 says a mortgage securing Rs 100 or more, other than a mortgage by deposit of title deeds, can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses. A mortgage by deposit of title deeds is created by delivering the documents with intent to create security.

This article explains provisions of the Transfer of Property Act, 1882 for information only and is not legal advice. Have a lawyer review any mortgage on a property before you buy.

Last updated 2026-11-10. PropNewz Team.