Guide to Selling an Apartment with a Dual Mortgage in Two Banks

Selling an Apartment with a Mortgage Open with Two Banks — Complete Guide

Selling an apartment encumbered by a dual mortgage (a mortgage open with two different banks simultaneously) is a more complex process than a standard sale. When an apartment has two separate bank mortgages, the seller must be aware of legal obligations, procedural steps, and the potential consequences of each stage. Mandelboum, Gor, Witzman-Gor & Co. has guided clients through this process for over 18 years, and we have developed deep experience in complex real estate transactions, including the sale of encumbered properties.

On this page, you will find a comprehensive explanation of what a dual mortgage means, the legal and banking steps you need to understand, the risks and rights you have as a seller, and how to avoid costly mistakes. Every case is unique, which is why we offer complimentary personal consultation to understand your specific situation.

What is a Dual Mortgage?

A dual mortgage (or a mortgage open with two banks) means that the apartment is encumbered to two different banks simultaneously. Typically, this occurs when the apartment owner took a first loan from one bank (the first mortgage), and subsequently took an additional loan from a second bank (the second mortgage), both against the same apartment. These multiple mortgages are registered at the Land Registry office, and each bank holds a lien on the property until full repayment of its debt.

The importance of understanding this concept lies in the fact that when selling the apartment, you must repay both loans from the proceeds you receive, and this requires precise coordination between the two banks, a notary, and your legal office.

Why Do People Take Out a Dual Mortgage?

There are several common reasons for having a dual mortgage: (1) Loan expansion — the apartment owner took an initial loan to purchase the apartment and subsequently took an additional loan for renovations, investment, or another financial need. (2) Purchase with two financing sources — at the time of purchase, the apartment owner received two loans from different banks to cover the purchase price. (3) Banking requirements — sometimes one bank requires a first mortgage, and a second bank requires a second mortgage. (4) Improvement of terms — the apartment owner switched banks or took out a new loan on better terms while maintaining the old loan.

Each of these reasons affects how your transaction will proceed at the time of sale.

Steps for Selling an Apartment with a Dual Mortgage

Step 1: Determining the Minimum Price and Conducting an Internal Review

Before you begin the sales process, you need to know how much money you need to repay both loans. This means: (a) contacting both banks separately to obtain an up-to-date debt report for each loan; (b) understanding all early repayment terms (if there are fees, accrued interest, etc.); (c) consulting with a legal office (such as our offices in Petah Tikva or Ramat Gan) to understand the legal implications of dual repayment.

Step 2: Signing a Sale Agreement

When you sign a sale agreement with the buyer, this agreement must include a clear clause addressing the multiple mortgages. Typically, the agreement will state that the seller (you) is responsible for repaying both loans from the proceeds, and that the transaction will be completed only after the mortgages are released at the Land Registry office. This protects both the buyer and the banks.

Step 3: Coordination with Both Banks

This is a critical step. You must coordinate with both banks regarding the date and time of repayment. Typically, the banks agree to release their mortgages on the same day, after receiving the funds. If you are working with a notary (as in many real estate transactions), the notary will be responsible for this coordination and for the secure transfer of funds.

Step 4: Verification of an Updated Tabu Certificate

Before closing the transaction, there must be an updated tabu certificate (property registry document) showing all mortgages on the property. This is essential to ensure there are no additional mortgages you were unaware of (for example, municipal tax liens or a legal claim placed on the property). Our office will review the tabu on your behalf as part of the legal consultation.

Step 5: Repayment and Mortgage Release

On the closing date, the sale proceeds will be transferred to a notary's account or a specific bank account. The notary or intermediary will verify that the funds are sufficient to repay both loans and will transfer the funds to both banks. Only after the banks confirm receipt of the funds will they issue instructions to release the mortgages at the Land Registry office.

Step 6: Registration of the New Tabu Certificate

After the mortgages are released, the notary or your legal office will submit a request to the Land Registry office to update the tabu. The new tabu will show that the property is no longer encumbered to any bank (or encumbered only to one bank if another mortgage remains), and this will complete the process.

Comparison Table: Mortgage Repayment Scenarios in Sale

Below is a table showing different scenarios and how to handle each one:

Each scenario requires precise coordination and documentation, so it is important that you have experienced legal support.

Frequently Asked Questions About the Process

Can I sell my apartment if I still owe money to two banks?

Yes, you can sell an apartment encumbered by mortgages to two banks. However, the proceeds from the sale must be sufficient to fully repay both loans. If the proceeds are less than the total debt amount, you will need to cover the difference from your own pocket, or obtain an agreement from the banks to partially release the liens (which is extremely rare). This is one of the most important issues you should clarify in advance with a law firm.

What happens if the buyer backs out during closing?

If the buyer backs out during closing (i.e., does not appear or cancels the purchase), you remain encumbered by the two banks. However, a well-drafted purchase agreement will protect you by imposing penalties or compensation on the buyer. Our offices in Petach Tikva and Ramat Gan ensure that your purchase agreement contains protections against such conduct.

How long does it take to release liens?

Releasing liens at the Land Registry typically takes between 3 to 10 business days from the moment the bank submits the request. However, the entire process (from coordinating with the banks to registering the new deed) may take 4–8 weeks, depending on the banks' cooperation.

What if one bank refuses to release its lien?

This is extremely rare, but if it happens, it is usually because the bank claims there is an unpaid debt or a dispute over the debt amount. In such a case, you must contact a law firm to file a lawsuit or obtain a court order requiring the bank to release the lien. This is complicated and can significantly delay the closing.

Do I need to pay fees or penalties to the banks for early repayment?

This depends on your loan terms. Some loans allow early repayment without fees, while others require small or large fees. This should be stated in your loan agreement. You should ask the banks about this before starting the sale process, so you can include these costs in calculating your minimum sale price.

What is a "first lien" and a "second lien"?

A first lien is the first loan registered on the property. A second lien is the second loan. Typically, a bank holding a first lien has priority over a bank with a second lien in case of foreclosure or execution. This means that if the sale proceeds are not sufficient to repay both loans, the bank with the first lien will receive the money first. This affects the risk of the bank with the second lien, so these banks often charge higher interest rates.

What role does a notary play in this process?

A notary serves as a secure intermediary in the transaction. They hold the proceeds in a notarial account, verify that everything is legally sound, and only after receiving approval from all parties (both banks, seller, buyer, Land Registry), they release the funds to the banks to repay the loans. This protects all parties.

What if I have specific questions about my situation?

Each case of selling an apartment with a dual mortgage is unique, and it depends on the loan terms, the sale proceeds amount, documentation, and the banks' cooperation. This is why we at Mendelboim, Gor, Witzman-Gor & Co. offer free personal legal consultation. In this meeting, we will examine your situation in detail, help you understand the risks and opportunities, and provide you with a clear action plan.