Mortgage Transfer

What Is a Mortgage Transfer?

A mortgage transfer is a transaction where either the borrower or lender assigns an existing mortgage (a loan to purchase a property—usually a residential one—using the property as collateral) from the current holder to another person or entity. Homeowners who are unable to keep up with their mortgage payments may seek a transfer so that they do not default and go into foreclosure.

KEY TAKEAWAYS

—A transfer of mortgage is the reassignment of an existing mortgage, usually on a home, from the current holder to another person or entity.

—Not all mortgages can be transferred; if they are, the lender has the right to approve the person assuming the loan.

—Mortgage lenders often include a due on sale clause in their loans that prohibits a home seller from transferring a mortgage to a buyer.

How a Mortgage Transfer Works

A buyer may want to take on an older mortgage because such a transfer could let them take advantage of previous interest rates that may have been lower than the current market rates. A mortgage transfer, if completed successfully without challenge or stipulations, would not change the terms or length of the loan, leaving just the remaining outstanding balance to be paid off. Doing so, a buyer might also avoid having to pay closing costs that are associated with buying a home with a new mortgage.

Not all mortgages are eligible for transfer. If it is, the mortgage is said to be, “transferable.” To transfer a mortgage, the lender will need to verify that the person or entity that will assume the loan has adequate income and credit history to be able to make payments in a timely manner.