A mortgage is one of the biggest financial commitments most people will ever make, and it’s not an easy feat to simply transfer that loan from one property to another. It’s possible, however, if you have a good credit history and have been paying your mortgage on time every month since inception. There are some things to consider when attempting this process, though:
In this post, we review the following Can You Move Your Mortgage To Another Property, can you transfer a mortgage to a family member, porting a mortgage to a higher value property, and do you have to pay a deposit when porting a mortgage.
Can You Move Your Mortgage To Another Property
Many buyers don’t intend to stay in a house forever. They often have plans to move sooner than later, especially first-time buyers, who are likely to buy properties before they find their “forever home.”
Many buyers don’t intend to stay in a house forever. They often have plans to move sooner than later, especially first-time buyers, who are likely to buy properties before they find their “forever home.”
Moving is expensive; moving can be a hassle; moving can be stressful; and moving can be time consuming. On top of it all, selling one property and purchasing another comes with its own set of costs that may or may not be covered by the mortgage lender.
If you bought your first property early in your adult life and need to move to a larger house because your family has grown or you found a better position elsewhere, you already have a mortgage loan for the first property. Is it possible for you to move your mortgage to another property?
If you bought your first property early in your adult life and need to move to a larger house because your family has grown or you found a better position elsewhere, you already have a mortgage loan for the first property. Is it possible for you to move your mortgage to another property?
Yes, it is possible if:
- You qualify for another loan based on the new home’s value and other factors.
- You have enough income and assets to afford both loans at once (for example, if the new house is located in an area where housing prices are higher).
Moving an existing mortgage from one place to another is not like moving an existing car loan or student loan. Mortgage loans are secured by the property itself, so there’s no easy way for the lender to simply transfer the loan balance. You must go through the entire process again, just as if you were getting a new mortgage altogether.
The good news is that you can transfer your existing mortgage to a new property if you want to buy or sell, but there are some important things to keep in mind. First, moving an existing mortgage from one place to another is not like moving an existing car loan or student loan. Mortgage loans are secured by the property itself, so there’s no easy way for the lender to simply transfer the loan balance. You must go through the entire process again, just as if you were getting a new mortgage altogether.
If interest rates are lower where you want to move—especially if they’re significantly lower—it may be worth it for other reasons (such as wanting more space) even though it means starting over with a new application and appraisal and paying higher closing costs upfront. On top of that, we recommend talking with several lenders because each will offer different terms depending on their current interest rate offerings at the time you apply for your new home loan!
The old process still applies when you apply for a mortgage loan tied to another property. You must qualify for the new loan, which means you must provide documentation of income, assets, liabilities and more.
The old process still applies when you apply for a mortgage loan tied to another property. You must qualify for the new loan, which means you must provide documentation of income, assets, liabilities and more.
If you own two properties that were purchased in your name and want to move one or both of them into someone else’s name (such as your child) then this is called a “deed in lieu” of foreclosure.
Additionally, while it’s possible that your rate will be similar and possibly even lower than what you’re currently paying on your mortgage, there is also the possibility that you could end up with a higher rate than what’s currently on your existing loan. This will depend on whether or not interest rates have generally gone down or up since you initially obtained the loan.
can you transfer a mortgage to a family member
Unplanned circumstances happen in life. If you’re going through a divorce or unexpected illness, you might not want to continue paying for a mortgage if it isn’t reasonable for your situation.
Some lenders permit a mortgage transfer if you have an assumable mortgage, and if your situation falls into one of the exceptions listed in the due-sale clause.
Here’s what you’ll need to check to see if your mortgage is transferable, and what to do if you can’t.
How to know if your mortgage is transferable
To determine whether you’re able to transfer your mortgage, you’ll have to see if you have an assumable mortgage.
An assumable mortgage will let a borrower transfer the mortgage even if they haven’t fully paid it off. As long as your situation fits one of the exceptions mentioned in the due-on-sale clause, another person can take over and assume responsibility for the loan.
If you have an adjustable-rate mortgage or a government home loan (including FHA, VA, and USDA mortgages), you might have an assumable mortgage. If you have a conventional fixed-rate mortgage, though, you’re out of luck.
“A conventional fixed-rate loan would not be assumable mainly because that interest rate is fixed for 15, 20, or 30 years,” says Christopher Hurdman, Senior Manager, Closing Operations at Better.com. “If interest rates go up in five years, then the lender doesn’t want to just give the lower interest rate loan to a new borrower.”
The simplest way to check whether your mortgage is assumable is to talk to your lender and get a better understanding of the lender’s policies. You’ll be able to go over any questions you have about your mortgage and learn more about possible exceptions a lender may allow.
The due-on-sale clause is a provision in a mortgage contract that requires you to pay off your loan entirely if you decide to transfer your mortgage to someone else.
In the due-on-sale clause, a lender may include a few exceptions that allow you to transfer your mortgage to another person without fully paying off the mortgage first. Some exceptions borrowers permit are when:
Before you decide to transfer your mortgage, take some time to weigh out the pros and cons.
Hurdman recommends comparing the existing mortgage rate to current mortgage rates.
If the current rate is higher than the rate on your loan, it may be a good decision to assume the old mortgage. But if mortgage rates are fairly low — like rates are right now — it may make more sense to refinance.
“You can get a fixed rate for 30 years now that’s probably lower than the interest rate you could get on an adjustable-rate mortgage two or three years ago,” says Hurdman.
What to do if a mortgage isn’t transferrable
If you have a conventional fixed-rate mortgage or your situation isn’t mentioned in the due-on-sale clause, Hurdman says you still have three options: refinancing your home, paying off your mortgage in cash, or selling your home.
Here are a few things to consider for each alternative:
Refinancing your home
If you don’t want to stay with your current mortgage, refinancing may be an option to pursue. When you refinance, you can add or remove a co-borrower and establish a new term.
This also may be worth exploring if current mortgage rates are fairly low and you’re able to lock in a better rate.
Paying off your mortgage in cash
If you’re still making payments but are in a fortunate situation where you have enough cash on hand, you may be able to pay it all off.
By paying off your mortgage, you are no longer bound by the due-on-sale clause and are able to gift or pass down your house. However, you’ll want to consider these factors if planning on paying it off early.
Selling your house
If you don’t want to maintain ownership of your house anymore, selling your home might be worth exploring. This may be a good choice if you want to pass on your house to your children.
“It’s possible to sell the property to your children, but give them a gift of equity, which is basically selling the property for a discounted price to your children and gifting them the equity that you have in the property, which will be the difference between the mortgage and the sales price,” says Hurdman.
porting a mortgage to a higher value property
Almost all mainstream lenders claim their mortgages are portable. But portability clauses have more caveats than a prenuptial agreement—so many that people hoping to port are routinely disappointed.
Back in 2011, about 3 out of 8 home sellers used to port their mortgage. But the percentage who port has been steadily sinking since then. We’d hazard to guess it’s near an all-time low, but there’s no recent data on it.
Porting is so convoluted these days that it has become one of the more over-rated mortgage features. Below we explain…
What is Porting a Mortgage?
Porting is when you move your mortgage from one property to another. People do it when they buy a new home, want to preserve their current interest rate and avoid a penalty for breaking the mortgage early.
What many don’t realize is that porting is like starting from scratch on your mortgage. It requires total re-qualification of everyone on the mortgage, meaning a whole new application, all new employment documentation, a fresh credit check and a new appraisal.
Porting Challenges
New government regulations, among other things, have made porting trickier. Here are just some of the reasons a mortgage cannot be ported:
Porting often doesn’t work out. A lot more people than you think end up paying a penalty to break their mortgage. That’s why it’s important to ask about your lender’s porting restrictions if there’s a chance you’ll move before your term is up.
Of course, if current rates are low enough to warrant breaking your existing mortgage and paying a penalty, that’s the way to go.
do you have to pay a deposit when porting a mortgage
Porting a mortgage is when you transfer your existing mortgage deal when you move to a new home, instead of taking out a new mortgage. Here’s how to do it and what to consider.
What’s inside
Finding a new home doesn’t necessarily mean that you need to give up your current mortgage deal. By porting your mortgage, you could take your interest rate and the same mortgage terms with you to your new property.
Read on to find out more about the porting process and whether it could be right for you.
What is porting a mortgage?
When you move, you may have the option to port your mortgage. This lets you transfer the mortgage deal you currently have to your new property, taking your current interest rate and other terms of the mortgage with you.
Instead of taking out a completely new mortgage, you use the money raised from the sale of your property to pay off your existing mortgage and take out a new mortgage on the same terms with your existing provider to cover the cost of buying your new home.
How does porting a mortgage work?
Porting a mortgage means you transfer the terms of your mortgage to a new property.
That means keeping the same interest rate, fixed-rate period and fees. However, depending on the lender you may be able to change the terms of your mortgage ‒ for example, extending it from 25 years to 30 years or switching from a joint mortgage to a single person mortgage.
Many lenders will highlight that their products can be ported to a new property, but it’s important to remember that this is not guaranteed. For example, the lender can turn down your request to port the mortgage loan.
How to port a mortgage
First, check the terms and conditions of your existing mortgage. This will clarify whether porting your rate is possible or right for your circumstances.
While you won’t be applying for a new mortgage from your lender, you do still have to formally apply to port it over to your new property.
Your lender will then carry out certain checks before making a decision. For example, they will want to make sure that you can still afford the mortgage and that you meet their current eligibility criteria. As a result, if your circumstances have changed, such as a drop in income, or if the lender’s criteria has changed, your application may be turned down.
The lender will also get a valuation of the property you want to buy through a mortgage valuation survey, to check that it meets its terms.
Can you port a mortgage?
This will come down to your lender. When porting a mortgage, the lender will carry out affordability checks to ensure that you can still afford the loan.
Can you port a mortgage with bad credit?
If you had a perfect credit record when you took out the initial loan but your score has taken a hit since then, the lender will be more wary about approving your application.
If you already had a less-than-perfect credit score when you took out the mortgage, still having an imperfect score may not prove a barrier to porting your home loan. Talk to your lender if you’re concerned about your credit score.
Porting a mortgage to a cheaper house
If you have found a cheaper home to buy than your current property – perhaps through downsizing or moving to a different area – you may need a smaller mortgage. This does not mean that porting your mortgage is impossible.
However, if your mortgage has early repayment charges, you may have to pay this fee on the difference between your current mortgage and the size of the borrowing you need for the new property.
For example, if you have a £200,000 mortgage and only need £150,000 for the new property you may have to pay an early repayment charge. If this was 3%, you would have to pay that on the £50,000 difference, which would come to £1,500.
However, some lenders allow you to use your overpayment allowance before early repayment charges kick in. This can sometimes be up to 10% of the mortgage balance. If in any doubt, check this with your lender.
John Fitzsimons has been writing about finance since 2007. He is the former editor of Mortgage Solutions and loveMONEY and his work has appeared in The Sunday Times, The Mirror, The Sun and Forbes. Read more
Holly champions clear, jargon-free writing. She’s been creating finance content for leading organisations for over 10 years. Read more