Can my mortgage be transferred to another person?
Short Answer:
Yes, but it depends upon the type of mortgage.
Longer Answer:
Transferring a mortgage to another person, often referred to as a mortgage assumption, is possible but not always straightforward. In addition, not all mortgages all for a transferring of a mortgage.
What is Mortgage Assumption?
A mortgage assumption allows a new borrower to take over the existing mortgage from the original borrower. This can be beneficial if the current mortgage has a lower interest rate than what's available in the market.
What types of Mortgages That Allow Assumptions?
- Assumable Loans: Some government-backed loans, like FHA and VA loans, are assumable, meaning they can be transferred to another person, subject to lender approval.
- Conventional Loans: Most conventional loans are not assumable. However, Conventional mortgages can be assumable due to divorce or death.
What are the steps to Transfer a Mortgage?
- Lender Approval: The new borrower must meet the lender's credit and income requirements to assume the mortgage.
- Legal Process: Legal documents must be signed to release the original borrower from the mortgage obligation and transfer it to the new borrower.
- Fees: There may be fees associated with the assumption process, including administrative and processing fees.
What are the benefits of Mortgage Assumption?
- Lower Interest Rates: The new borrower can benefit from the original loan's lower interest rate.
- Cost Savings: Assumption can be cheaper than taking out a new mortgage, as it may avoid some closing costs.
What are the Challenges and Considerations of Mortgage Assumption?
- Lender Restrictions: Not all lenders allow mortgage assumptions, and those that do may have strict requirements.
- Covering the Gap Between Sales Price and Loan Amount: when you assume a mortgage, you take over the exact current balance of the mortgage. Therefore, you will need to make up the difference between the sales price (if there is one) and the loan amount. This can be done by a down payment or obtaining a second mortgage.
- Due-on-Sale Clause: Some mortgages have a due-on-sale clause, requiring the loan to be paid in full upon transfer of ownership, making assumption impossible.
- Time - The mortgage assumption process must be handled by the current lender. Depending upon how busy they are, mortgage assumptions can take between 45 and 120 days from submission.
Conclusion
While transferring a mortgage to another person is possible, it requires lender approval and may involve specific fees and legal processes. It's essential to consult with the lender who currently holds the mortgage and possibly a legal professional to understand the feasibility and implications of a mortgage assumption
If you have other mortgages assumption, please reach out at teamjd@mainstreethl.com
These blogs are for informational purposes only. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. Should you have any questions about the information provided, please contact me.
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