When it comes to having one of the homeowners move out or selling a house, it is quite understandable when you transfer a mortgage to someone else. Instead of paying closing costs, applying for a new loan or starting over with pretty high interests, the owner can take over any current payment.
If you’re wondering if it is possible to transfer a mortgage, the answer is yes. However, it’s not always that easy. In this article, we are going to cover that.
Assumable Mortgage
If your loan is “assumable,” you’re pretty lucky, this means that it is possible to transfer the mortgage to someone else. As such, it is essential that you should check if you have an assumable mortgage.
Nothing is placed in the loan agreement that will prevent you from completing a transfer. However, an assumable mortgage is a bit tricky to transfer.
In almost every case, the loan’s new owner needs to qualify for the loan. The mortgage lenders Arlington still have to look at the debt to income ratios and credit scores of the borrower to see if he or she can repay the remaining amount of the loan.
The process is just the same as how a borrower will apply for a new loan. To completely transfer an assumable mortgage, you have to go to your lender and request the change. The applications should be complete, and the assets and income are verified. You should also pay a fee during the whole process.
Refinancing
If your loan is not assumable, you can refinance your loan. The new borrower needs to qualify for the loan and apply for a new loan. The loan will be used to pay off the mortgage debt. As such, you might still have to coordinate with the mortgage lender to remove any liens. This way, you can use the house as collateral.
Due-on-Sale
When you transfer a mortgage, lenders most often don’t gain anything from it. Buyers can just come out ahead with the help of a “mature” loan and early interest payments removed. Sellers can sell their property quickly and at a higher price because of the very same benefits. However, lenders stand to lose, so they don’t like transfers that much.
One thing you can do is due-on-sale. What is that? It is a section of your loan agreement that states that when the property is sold, you must completely pay the loan. There are times, however, where you have to ask your lender and look for a local attorney to review your agreement, so you’ll know if a transfer is entirely possible or not.
Unofficial Transfers
If you can’t seem to get the approval of your lender for a transfer, you might go with “informal” arrangements. This is a bit of a bad idea since you might be putting yourself in trouble. Not only that but you will still be responsible for your loan even if you are not living in your house anymore.