Insights | Selling Mortgaged Homes

Author: Tuan Pham

(Ngo & Partners is pleased to share the article "Selling Mortgaged Homes" by Tuan Pham, LL.M., Of Counsel at Ngo & Partners, originally published on VnExpress, 22 July 2026.)

The draft revised Law on Housing proposes allowing developers to sell homes even while the home or the project remains mortgaged to a bank — provided the buyer consents.

It is a solution that balances interests: developers raise capital more easily, banks keep their security, and people still get to buy homes. But the word "consents" is precisely what makes this rule worth careful thought.

Imagine buying a car, paying in full — while the car remains security for the seller's loan. When everything runs smoothly, you may notice no difference. But if the seller defaults, the story changes entirely.

Housing is an even more particular asset. To buy a few dozen square metres of floor space, people pour in a lifetime of savings, or a loan stretching across decades. What they need is not merely a contract bearing all the right signatures, but the certainty that the home they buy will truly be theirs.

That is why the current Law on Housing requires developers to discharge the mortgage before selling. The essence of the rule is simple: the developer's debt stops with the developer, and is not tipped onto the buyer. Yet the current rule has its own cost. In a market still heavily dependent on bank credit, requiring discharge before sale can slow the circulation of capital, stretch project timelines, constrain supply and push home prices up. That is the price the current policy pays to protect buyers.

The new draft changes the approach. Instead of forcing developers to remove the risk before selling, it permits the transaction to proceed if the buyer accepts that the home is mortgaged. This follows the principle of freedom of contract in civil relations, shifting from "prohibit in order to protect" to "disclose the risk and let the parties decide". In theory, the proposal could help the capital market run more flexibly.

In home purchases, however — where buyers typically stand in the weaker position and must pay most of the contract value up front — the question is whether a consent mechanism is yet sufficient to replace the existing protective barrier.

Legally, the buyer has the right to refuse. But in practice, how many choices do they have? The sale contract is drafted by the developer. Buyers may choose the floor, the aspect, the size — but rarely the legal terms. If they do not accept, the remaining option is usually to walk away from the home they wanted.

The buyer's signature confirms that they know the status of the home and the project. But that signature does not extinguish the bank's rights over the secured asset; it does not guarantee the mortgage will be discharged on time; and it does not automatically recover the buyer's money if the developer falls behind on the project or runs into liquidity trouble. In other words, a signature does not make the risk disappear. It merely confirms who will bear it if the risk materialises. "Consenting" is not the same as "being protected".

Most homebuyers borrow from banks. So another question needs answering: will a bank accept that very home, once again, as security for the buyer's loan? If the answer is no, the new rule inadvertently makes credit harder for people to access. If the answer is yes, questions arise over how security interests are created and ranked when both the developer and the buyer hold credit relationships tied to the same home.

Nor has the draft yet built a commensurate "safety cushion". It is rather like removing the barrier at a dangerous bend before the new guardrail is up. Most of the risk, at that point, shifts to the buyer.

The real estate market needs capital. Developers need more room to deliver projects. But it would be more sensible if expanding developers' rights did not mean expanding buyers' risks.

The right to sell mortgaged homes can be broadened — but only alongside a protective mechanism of equivalent effectiveness to today's discharge requirement. Until such a mechanism exists, keeping the current rule deserves serious consideration.

Because in the end, a signature expresses the buyer's consent — but it cannot substitute for the duty of protection that the law owes to the weaker party in a transaction.