Selling Property That Still Has a Mortgage
Updated 3 November 2026 · Land & Property editorial team
You can sell property that still has a mortgage if the loan is cleared at completion. Ask the bank for a written payoff figure, agree with the buyer that the price pays the bank first, and make the release a condition of the sale. Under the Mortgage Act, 2009, the lender must release the mortgage on payment, and the registrar records the release on the title. As of November 2026.
- Right to release
- On payment, the mortgagee must release the mortgage at the mortgagor's request and cost (Mortgage Act s.14(1))
- Release form
- In the prescribed form (s.14(2)); the registrar records it on the title (s.15(1))
- Nature of a mortgage
- Security only; it does not transfer the land to the bank (s.8(1))
- If you default
- Bank must serve a notice to sell and wait 21 working days before completing a sale (s.26(2))
Can I sell land with a bank loan on it?
Yes, if the sale clears the loan. The Mortgage Act, 2009, section 8(1) says a mortgage has effect as security only and does not operate as a transfer of any interest in the land. So you remain the owner, and you can sell, but the buyer will not accept a title that still shows the bank's charge. The practical question is how the money and the release move on completion. Plan them before you advertise. The Act text we read does not itself say that a borrower needs the bank's consent to sell, but your loan and mortgage documents may. Read them, and ask the bank in writing.
This is general information as of November 2026, not legal advice. If the property is a house or flat, also see How to Sell Your House or Apartment in Uganda.
What is a redemption statement and why do I need one?
A redemption (payoff) statement is the bank's written figure for what clears the loan on a stated date: principal, interest and any lawful costs. Ask for it early, and again just before completion, because interest keeps running. Get the bank's account details from the bank itself, in writing. Do not accept payment instructions that arrive by message from someone claiming to be the bank.
Do the sum before you set your price. If you owe UGX 400 million and the buyer pays UGX 750 million, then UGX 400 million goes to the bank and the balance, less costs, reaches you. If the price is below the payoff, you must cover the shortfall from your own money, and the bank will not release until it is paid. Ask your bank about the position on any early repayment charge in your loan documents.
How does the bank consent and release work?
Section 14(1) of the Mortgage Act says the mortgagee shall, at the request and cost of the mortgagor, release the mortgage at any time on payment of the secured money and costs, and terms that remove or restrict that right are void. Section 14(2) says a discharge must be in the prescribed form. Section 15(1) says that on registration of the release, the registrar records it on the certificate of title, and under 15(2) the land ceases to be subject to the mortgage to the extent stated.
Put it in your sale agreement as a condition:
- The buyer pays the bank's payoff figure directly to the bank, and the balance to you.
- The bank signs the release and returns the duplicate title to your advocate.
- The advocate lodges the release and the transfer.
- A fresh registry search confirms the mortgage is gone before you hand over possession.
A bank letter saying the loan is cleared is not the same as a release recorded on the register. Wait for the recorded release, or have your advocate hold funds until it is lodged. The Act sets no deadline for the registry to record a release, so ask the registry what timing to plan for.
What if I cannot afford the loan?
Act early. Under the Mortgage Act, section 19(2) a mortgagor in default has a chance to rectify the default within forty-five working days of the notice. If the default continues, section 26(2) says the mortgagee must serve a notice to sell and must not complete a contract for sale until twenty-one working days have passed from service. Section 20(e) lists sale of the mortgaged land among the mortgagee's remedies.
That gives you a window, so a seller who sells before the bank does keeps control of the timing and the buyer. Speak to the bank in writing, agree a payoff date and tell the buyer honestly why you are selling. Never hide a notice. Under section 26(3) a copy of the notice to sell must also go to a spouse, in the case of a matrimonial home, so a spouse will know. If you are buying out a bank repossession, see Cheap Houses for Sale by Banks in Uganda: How It Works.
What other problems can delay a mortgaged sale?
- Caveats and court orders. Check the search for these as well. See Selling Land With a Caveat on the Title.
- Tenants. If the house is let, the buyer will ask about the leases. See sell house with tenants.
- A second mortgage or trees. If part of your income is from trees on the land, see sell trees on mortgaged land and ask the bank whether it must agree.
- Developers. If a developer wants the land with the loan, they must still clear it. See sell land to developer.
- Tax and papers. You will still need a TIN and your tax papers in order. See tax clearance to sell land.
When the loan is clear and the papers are in order, list your land free or list your property free. The overview of all routes is at Sell Your Land, House or Forest in Uganda.
Frequently asked questions
Can I sell land with a bank loan on it?
Yes, if the sale clears the loan. The mortgage is security only and does not transfer the land to the bank. Get a written payoff figure, make the release a condition of sale, and check that your loan documents do not require the bank's consent.
Who pays off the mortgage?
Usually the seller, out of the sale price. Best practice is for the buyer to pay the bank's payoff figure directly to the bank and the balance to the seller, with the release and transfer lodged together by an advocate.
Does the bank have to release the title when I pay?
Yes. Section 14(1) of the Mortgage Act, 2009 says the mortgagee shall release the mortgage at the mortgagor's request and cost on payment of the secured money and costs.
What if the sale price is lower than the loan?
You must cover the shortfall, because the bank will not release until it is paid. Ask the bank for a payoff statement before you set the price.
What happens if I default before I sell?
The bank must serve a notice to sell and cannot complete a sale contract until twenty-one working days have passed (section 26(2)), after the earlier default notice period. Selling first usually keeps more control.
Sources
- Mortgage Act, 2009 (Act 8 of 2009), sections 8, 14, 15, 19, 20 and 26, Uganda Legal Information Institute / FAOLEX (accessed 2026-11)