When it comes to mortgage loans, they can be transferred from one person to another under the right circumstances. This type of transaction is helpful when interest rates are high. Taking over a mortgage from a family member may also be the best option. For instance, if a child decides to buy his or her parent’s home, then the lender may agree to a mortgage transfer.
Loans that are Transferrable
To transfer a loan to another person, you must have a mortgage that is assumable. For most people, the transferring process is difficult because the new borrower will need to qualify for the loan. The lender will check the new borrower’s credit history as well as his or her debt-to-income ratio. Lenders will want to confirm that the new borrower is as able to pay for the loan as you were when you applied for it initially.
You should also plan to pay a small fee for the transferring process. Assumable mortgages do not exist in every sector of the loan industry. Most of these mortgages are government backed ones like FHA or VA loans. Conventional mortgages with assumable terms exist, but they are rare. Lenders of conventional mortgages usually include terms like due on sale clauses with their loans. When this is a part of your loan terms, you are required to pay the loan in full when a transfer of ownership occurs.
Avoid Unofficial Mortgage Transfers
If your mortgage company refuses to approve your request to transfer the loan to another person, you may be tempted to set up an unauthorized arrangement. For instance, some people sell their home and allow the existing loan to remain in place. Then, they accept a verbal agreement that involves the buyer making house payments to him or her directly. This can be a problem for you because the mortgage company would hold you legally responsible for the loan even if you aren’t living in the house.
A Problem with Profitability
Lenders are in the business of making money. When a borrower transfers a mortgage to another person, the lender doesn’t really benefit. Instead, the buyer does with fewer years left to pay the mortgage along with more favorable terms. If you are considering transferring your mortgage to another person because your finances have changed, be sure to discuss your options with the lender.