bvvgc

Can you transfer mortgage? Hard to find Assumable mortgages

Can you transfer a mortgage?

When you sell a home or one of the owner’s moves, it might make sense to transfer the mortgage to the new owner. Instead of applying for a new loan, paying closing costs, and starting over with the higher interest charges, the homeowner will only take on current payments.

It is possible to transfer a mortgage, but it is not always easy. We will cover the details below, but a brief summary of your options includes:

  1. Transfer an assumable mortgage by asking your lender to make the change.
  2. Refinance the loan
  3. Transfer when the situation does not activate the “loan for sale” clause of the loan.

Assumable mortgages

  1. If a loan is loanable, you’re in luck: that means you can transfer the mortgage to someone else. There is no language in the loan agreement that prevents you from completing a transfer. However, even assumable mortgages can be difficult to transfer. In most cases, the “new” borrower needs to qualify for the loan. The lender will examine the borrower’s credit scores and debt/income ratios to assess the borrower’s ability to repay the loan. The process is basically the same as if the borrower were to apply for a new loan (but of course, the borrower can take the existing loan halfway). Lenders approved the original loan application based on the credit and income of the original applicants, And they don’t want to let anyone off the hook unless they have a replacement borrower who is just as likely to repay. 
  2. To complete an assumable loan transfer, request the change with your lender. You will have to complete applications, verify income and assets, and pay a modest fee during the process.
  3. Transfer of ownership: Changing the names of a loan only affects the loan. You may need to change who owns the property, transfer title, use a waiver act, or take any other steps required in your situation.

Hard to find?

  1. Unfortunately, assumable mortgages are not widely available. Your best bet may be whether you have an FHA loan or a VA loan. Other conventional mortgages are rarely assumable. Instead, lenders use a clause of sale, which means that the loan must be repaid upon transfer of ownership of the home.

Refinancing

  1. If a loan is unaffordable and you can’t find an exception to a loan clause, refinancing the loan might be your best option. Like a guess, the new borrower will have enough income and credit to qualify for the loan. The “new” homeowner will simply apply for a new loan individually and use that loan to pay off the existing mortgage debt. You may have to coordinate with your lenders to get the liens removed (unless the new borrower and new lender agree to them) so you can use the house as collateral, but it’s a good, clean way to get the job done. . Some privileges are routinely transferred from one owner to another (for example, if improvements were made with PACE funding).
  2. Debt for sale lenders typically doesn’t benefit from allowing you to transfer a mortgage. Buyers would get ahead by getting a more “mature” loan, with advance interest payments out of the way. Sellers would sell your House more easily – possibly at a higher price – because of the same benefits. However, the lenders are about to lose, so they are not willing to approve the transfers. A sale clause is a section of a loan agreement that says that the loan must be repaid when the property sells (the loan is “accelerated”).
  3. Exceptions to the rule: In some cases, a loan can still be transferred – even with a pending sale clause. Transfers between family members are often allowed, and your lender can always be more generous than your loan agreement says (it’s an option they can exercise, and they don’t have to – but don’t wait). 
  4. The Garn-St. Germain prevents lenders from exercising their acceleration option under certain circumstances. Several of the most common situations are:
    1. When a joint tenant dies and property transfers to a surviving adjuvant tenant
    2. Transferring the loan to a relative after the death of a borrower
    3. Transfer of property to the spouse or children of a borrower
    4. Transfers as a result of divorce and separation agreements
    5. Transfers to a living trust OR a living trust) where the borrower is a beneficiary

See the full list of exceptions and review this list with your attorney.

Unofficial transfers

  1. If you can’t get your application approved, you might be tempted to set up an “informal” arrangement. For example, you could sell your home, leave the existing loan in place, and have the buyer repay your mortgage payments.
  2. This is a bad idea. Your mortgage contract probably doesn’t allow it, and you could even find yourself in legal trouble, depending on how things are going. What’s more, you are still responsible for the loan – even though you no longer live in the house. What could go wrong? Some possibilities include:
    • If the buyer defaults, the loan is in your name, so that’s still your problem (late payments will show up on your credit reports and lenders will come after you If the home is sold in foreclosure for less than worth it, could be responsible for any deficiencies.
    • There are better ways to offer financing to sellers A potential buyer.

Your choices

  • If you can’t get a transferred mortgage, you still have options, depending on your situation. Again, death, divorce, and family transfers can give you the right to make transfers, even if your lender says otherwise.