If an existing mortgage is transferred from the current holder (lender or borrower) to another person, the transaction is called transfer of mortgage. This is usually used by homeowners when they are unable to make repayments and want to avoid foreclosure.

Most often, the transfer of mortgage usually takes place under the following conditions:

• Transfer between lenders: In such a case, you may receive updates or changes regarding your mortgage account in the mail from your lender.
• A borrower is at default: If you are at the risk of foreclosure because you are unable to keep up with your mortgage payments, you can seek a transfer to minimize the risk of default. This is possible when either you or the bank wishes to transfer an existing mortgage from the current holder to another person.
• A new owner can be brought on board
  If you are failing to keep up with your mortgages, another option is to try and convince your lender to help assign the mortgage to a new owner. All payments thereafter will be paid by the new owner. However, to transfer a mortgage, the lender will need proof that the new owner has the funds to pay back the mortgage. The new owner should have a good credit score, good credit history, and sufficient income to make their payments regularly and on time.

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• Transfer of lender ownership: In the case of mortgage transfer among lenders, the loan ownership and servicing are simply transferred by your lender to another. This happens when your lender company wants to sell the mortgage to another company or bank. This process does not directly affect you. All you need to do is send your payments to the new owner company instead of the old one. For such a transfer, you are required to receive proper notification at least 15 or more days before, from both your old lender and the new company. In this case, the new bank is required to notify you of the transfer within 30 days after taking up the mortgage account. You also get a 60-day grace period in which you won’t be charged late fees in case you send your payment to the wrong bank.
• Effects of a transfer mortgage on you: You have the same terms as your original mortgage agreement including the same interest rate, balance, and term. The only change is the name of the company to which you will send your bill.
• Other options: If you want to leave your home but do not want to sell it or go through the entire process, you can apply for a mortgage transfer to another person. Or if a family member with better credit can take over the loan for you, you can get it transferred to them. They will be “assuming” the mortgage for you. Mortgage assumption is a rare procedure with the bank making the final call, based on whether they find the new borrower creditworthy.

If your mortgage is non-assumable, another option for you is to refinance the loan, that is, you can apply for a new loan to pay off the existing debt.

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