[Direct answer]After the house is left unfinished, whether the loan still needs to be repaid depends on the path chosen: if the purchase contract is continued to be performed, the loan contract will still be valid, and unilaterally stopping the loan will constitute a breach of contract and affect the credit record; if the house is definitely unable to be delivered, the purchaser may terminate the commercial housing sales contract in accordance with Article 563 of the Civil Code of the People's Republic of China. If the termination of the sales contract makes the purpose of the loan contract impossible to achieve, the purchaser may request the termination of the loan contract in accordance with Article 20 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Disputes over Commercial Housing Sales Contracts (amended in 2020). According to Article 21, the developer shall return the principal and interest of the housing loan received to the bank, and the principal and interest of the purchase price shall be returned to the purchaser. The losses shall be borne by the developer in principle. The "Reply of the Supreme People's Court on the Protection of Consumer Rights in Commercial Housing" implemented on April 20, 2023 further clarifies that if the commercial housing cannot be delivered and there is no possibility of actual delivery, the purchaser's right to request the return of the paid purchase price shall take precedence over the right to priority compensation for the construction project price and the right to priority compensation for the mortgage. For more details, please refer to the original text. 房屋烂尾后，贷款是否还需要还，取决于选择哪条路径：若继续履行购房合同，贷款合同依然有效，单方停贷会构成违约并影响征信；若房屋确定无法交付，购房人可依《中华人民共和国民法典》第五百六十三条解除商品房买卖合同，买卖合同解除致使贷款合同目的无法实现的，可依《最高人民法院关于审理商品房买卖合同纠纷案件适用法律若干问题的解释》（2020年修正）第二十条一并请求解除贷款合同，依第二十一条由开发商将收受的购房贷款本息返还银行、购房款本息返还购房人，损失原则上由开发商承担。2023年4月20日起施行的《最高人民法院关于商品房消费者权利保护问题的批复》进一步明确，商品房不能交付且无实际交付可能的，购房人已付房款的返还请求权优先于建设工程价款优先受偿权和抵押权受偿。详见Legal services for real estate transactions and construction projects.

I. Problem Background and Typical Scenarios

In recent years, some real estate projects have been halted due to developers' capital chain ruptures, leaving buyers in a dilemma of "not getting the house but still having to pay the monthly mortgage". Some homeowners' groups have chosen to stop repaying their loans collectively to express their demands. It should be clarified that the purchase contract and the mortgage loan contract are two independent contracts: the loan is issued by the bank to the buyer and paid to the developer, and the buyer's repayment obligation to the bank does not automatically disappear due to the suspension of the construction of the house. However, the law does not require buyers to bear the losses of unfinished projects alone - the system arrangement of contract termination and refund of funds is a legal path to shift the losses to the responsible party, the developer. The problem is that many homeowners do not terminate the contract and stop repaying their loans for a long time. The breach of contract liability and credit penalty continue to accumulate, which instead turns them from "the party in the right" to "the party in breach of contract", putting them in an even more passive situation.

II. Key points of contention

  • The consequences of defaulting on a loan: If the bank suspends the loan without legal proceedings, it can collect the loan according to the loan contract, charge penalty interest, declare the loan as overdue and sue the borrower. After winning the lawsuit, the bank can apply to execute the borrower's other assets, and the borrower's personal credit will also be damaged.
  • Can the right of rescission be established? Whether the project is temporarily suspended or it is definitely impossible to deliver, it needs to be judged comprehensively based on evidence such as the record of urging, the commitment to resume work, and the information of the government special team; the right of rescission shall be exercised within one year from the date of knowing the reason for rescission (Article 564 of the Civil Code of the People's Republic of China), and it will be extinguished if it is exceeded the time limit.
  • The order of funds return and compensation: Whether there are still funds in the developer's account, the buyer's right to request a refund, the priority right of compensation for the construction project price, the mortgage, and the order of ordinary creditor's rights directly determine how much money they can ultimately recover.

III. Professional analysis by Henglue Lawyers

Henglue Lawyers observed in handling disputes related to unfinished buildings that the order of processing is more important than emotions. The first step is to fix evidence and assess the situation: preserve the purchase contract, payment receipts, mortgage contracts, photos of the construction site after suspension, government interviews and documents related to ensuring on-time delivery, and inquire with the housing and construction department about the status of the project's pre-sale fund supervision account and the resumption plan to determine whether the project is "salvageable" or "irretrievable". The second step is to evaluate the path to termination: for projects that are determined to be impossible to deliver, first send a written notice to the developer demanding on-time delivery. If the developer still fails to perform within a reasonable timeframe, sue to request the termination of the sales contract and loan contract, and simultaneously claim that the developer return the principal and interest of the loan to the bank and the purchase price to the buyer; for projects with a possibility of resumption, while claiming late breach of contract penalties, retain the right to terminate to avoid being passive if the project is revived after rash termination. The third step is to claim priority protection: according to the 2023 approval, the buyer's right to return the paid purchase price takes precedence over the project's construction funds and mortgage rights. Even if the developer enters bankruptcy proceedings, the buyer should timely declare and claim this priority during the creditor's declaration period. In practice, it is most taboo to neither terminate the contract nor stop payments for a long time. The losses will not decrease, but the breach of contract liability will accumulate. For complex disputes involving contract termination and developer bankruptcy, legal advice can be sought to resolve them in a comprehensive manner.Business and contract dispute resolution services for enterprisesEvaluate the plan.

IV. Practical suggestions and legal basis

At the legal basis level: Article 563 of the Civil Code of the People's Republic of China lists the statutory circumstances of rescission, including the delay in performing the main obligations of the contract and the failure to perform within a reasonable period after being reminded, and the delay in performance resulting in the failure to achieve the purpose of the contract; Article 564 stipulates a one-year exclusionary period for the right of rescission; and Article 577 serves as the general basis for breach of contract liability. Article 20 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Disputes over Commodity Housing Sales Contracts (amended in 2020) stipulates that where the commodity housing sales contract is confirmed as invalid or rescinded, resulting in the failure to achieve the purpose of the commodity housing guarantee loan contract, the party's request for rescission of the loan contract shall be supported; Article 21 clarifies that after the rescission of both contracts, the seller shall return the received housing loan and the principal and interest of the purchase price to the guarantor and the buyer respectively. The Reply of the Supreme People's Court on the Protection of Consumers' Rights in Commodity Housing (effective from April 20, 2023) establishes the priority of the buyer's right to return the purchase price. At the practical advice level: Do not default on payments in your own name first; owners can collectively entrust lawyers to negotiate and litigate together to reduce individual costs; pay attention to clues of misuse of pre-sale fund supervision accounts, and report them to the supervision department in writing if necessary; if the developer enters bankruptcy proceedings, timely declare the creditor's rights within the creditor's declaration period, and may combine with other legal means to safeguard their rights and interests.Creditor-debtor relations and enforcement case servicesFollow up on the repayment.

5. Henglu Law Firm's Reminder

The essence of the unfinished building disputes is to shift the losses back to the responsible parties, rather than forcing buyers to bear the risks of loan suspension and monthly payment pressure alone. Before obtaining an effective judgment confirming the termination of the contract and the developer's repayment of the loan principal and interest, the cost of prematurely suspending loans must be borne by oneself; after completing the legal procedures, even if the developer is temporarily unable to repay, the priority of compensation and subsequent enforcement and bankruptcy proceedings will continue to safeguard your rights. The resumption of construction information for the project, the progress of the government's special team, and the timing of litigation require dynamic weighing. It is recommended to consult professional lawyers as soon as possible to develop a comprehensive solution, which can be achieved throughBeijing Henglu Law FirmMake an appointment for an evaluation.

Q1: What are the worst possible consequences of directly suspending loans and cutting off financing?

The bank may claim penalty interest and breach of contract liability according to the loan contract, declare the loan as being due in advance, and initiate legal proceedings. If the buyer loses the case, the deposits, vehicles, and even other properties under their name may be subject to enforcement, and a negative record will be added to their personal credit report, which will affect their subsequent loan applications and employment reviews. Before the house is delivered, the purchase contract is still being performed. Stopping payments does not exempt the buyer from their repayment obligations to the bank, but will only worsen their legal situation. If it is necessary to stop repayments, the buyer should first go through the legal procedures to terminate the contract, obtain an effective legal document, and then arrange repayments and returns according to the judgment, rather than simply stopping payments.

Q2: How can we determine whether the house will still be delivered on schedule?

The following four types of information can be used to make a comprehensive judgment: whether the project is included in the local guarantee of on-time completion and special team management; whether the pre-sale fund supervision account has been misappropriated, and how large the balance and the subsequent project payment gap are; whether the contractor has actually resumed work and the actual progress; and whether the developer has entered bankruptcy or restructuring procedures. For projects with repeated stoppages, huge funding gaps, and no successors, the risk of continued waiting is high, and the termination and claim procedures should be initiated as soon as possible. For projects with clear resumption plans and sufficient funds, the developer can claim breach of contract penalties and retain the right to terminate the contract while observing the situation. The basis for judgment should be based on written documents and on-site evidence, rather than on the developer's verbal commitments.

Q3: If the developer goes bankrupt, can I still get back the down payment and the monthly mortgage payments I've already made?

There's a chance, but it all depends on the priority and the asset situation. According to the "Reply of the Supreme People's Court on the Protection of the Rights of Commodity Housing Consumers", the claim for the return of the paid housing price by the buyer due to the failure to deliver the house and the lack of actual delivery possibility takes priority over the right to priority compensation for the construction project price, the mortgage right, and other ordinary creditor's rights, even in bankruptcy proceedings; the paid monthly installments also fall within the scope of the paid housing price. The claim should be declared within the creditor's declaration period determined by the court, with the priority claim clearly stated, and accompanied by evidence such as the purchase contract and payment receipts; the final repayment ratio depends on the remaining assets of the developer.

Q4: Which is more cost-effective, terminating the contract or continuing to wait for the delivery of the house?

It depends on the actual situation of the project and one's own financial capacity. The benefits of terminating the contract include clear loss prevention, no new loans, and priority protection for the right to request repayment, but the cost is that the developer may be unable to repay debts for a long time. Continuing to wait preserves the possibility of "taking possession of the house", but the monthly mortgage pressure will persist, and if the project fails again, the losses will be even greater. For families who need to purchase a home for self-use and where the resumption of the project is certain, waiting is more beneficial. For investment purchases or those with financial constraints, it is safer to terminate the contract and claim repayment as soon as possible. The two solutions are not set in stone. One can first claim breach of contract penalties and retain the right to terminate the contract. A lawyer can make dynamic decisions based on the progress of the resumption of the project.

Q5: If owners want to protect their rights collectively, how should they organize themselves?

It is recommended to elect representatives to jointly entrust lawyers, share purchase contracts, payment receipts, evidence of construction suspension, and government-related documents to form an evidence pool; report the supervision of pre-sale funds to the housing and urban-rural development and financial regulatory departments in writing and keep the receipts; litigation can be initiated separately or start with individual cases first, and then promote the model after obtaining favorable judgments. Pay attention to avoiding excessive gatherings and other behaviors, and prevent the protection of rights from turning into public security risks; every communication with the special team and the developers should be documented and used as evidence for subsequent litigation. Organizing an orderly and evidence-unified collective protection of rights is usually more efficient than individual scattered actions.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, to avoid missing the statutory time limit. →Legal services for real estate transactions·Beijing Henglue Law Firm