Selling a house can be a tricky and involved process, and the ability to transfer a mortgage to someone else can appear pretty enticing in contrast.
But is transferring an option? Today, we’ll tackle how this process works and if it might be an option for you.
Why is Transferring a Mortgage Beneficial?
There are several reasons someone might wish to transfer their mortgage. One of the main benefits is that the new mortgage owner would simply take on the existing mortgage loan and debt, along with the locked-in interest rate. This is especially appealing if the current rates are higher than when the loan originated (though not likely to happen for the near future, with rates at historic lows). Another perk to the buyer who assumes a transferred mortgage is that they can potentially avoid having to pay the usual closing costs associated with buying a property and taking on a new loan. Finally, for the seller, transferring a mortgage is one way to avoid defaulting on their payments and going into foreclosure.
Which Mortgages can be Transferred?
You may have noticed that transferring the loan only provides benefits to the buyer or seller, but not so much the lender. Perhaps because of this, many mortgage loans explicitly state that they are not assumable, meaning they cannot be transferred. Assumable, or transferable, mortgages are not widely available, but they may be more likely with a VA loan or FHA loan. In most other cases, with conventional loans, the lender usually includes a due-on-sale clause, which requires the loan to be paid off when the house is sold.
Exceptions to the Rule
Even with a due-on-sale clause, there are some cases where it may still be possible to transfer a mortgage. A common exception is when transferring the loan to a family member, such as in the case of death, or divorce and separation agreements. The key is to contact your lender to find out what might be possible. The lender does have the ability to be lenient about the loan agreement, so it may be worth your time to ask about the options. An attorney can also help you by reviewing your loan agreement and ensuring that your bank is providing correct information.
How to Make the Transfer
If you have determined that you can transfer your mortgage loan, the new borrower will still need to qualify with the lender. Once you’ve contacted the lender to request the change, they will look into the new borrower’s credit score, and debt-to-income ratio, much the same as if they were applying for a new mortgage. A fee will also usually apply during the process, and you must be careful to also change the name on the title, using a quitclaim deed.
Sell Your OKC Home Can Help
If you are able to transfer a mortgage on your Oklahoma City home, it can be beneficial to both the buyer and the seller. Particularly if you are unable to keep up with your mortgage payments, this is a great option for avoiding foreclosure. If the transfer isn’t possible, another option is to turn to Sell Your OKC Home. When you need to get out of a mortgage, we can assist by giving you a fair cash offer, allowing you to sell and close on your house in a short period of time. Contact us today for a free, no-obligation offer for your home, no matter the condition.