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How To Transfer A Mortgage

Transferring a mortgage  to another person is an option for some homeowners looking to avoid defaulting on their mortgage if they have someone willing to take their place on the loan. However, it’s not an easy process.

A mortgage transfer is defined as a transaction where the borrower or lender assigns an existing mortgage from the current holder to another person or entity. Transferring a mortgage to another property is also possible. This is referred to as mortgage "portability". The property the mortgage is being transferred to must be equal or greater in value than the current property.

Not all mortgages can be transferred, though. In order to transfer a mortgage to another person, the lender will need to verify that the new holder of the mortgage has adequate income and a solid credit history. The lender will not transfer a mortgage to someone who is less qualified than the current holder. Lenders also tend to frown on transferring a mortgage to a family member, although it's not uncommon to get it approved if they can prove to be a better option than the original borrower.

Transferring a mortgage to another person tends to be easier if you have an FHA or VA loan, but even with these it can be very challenging. Because of this, some homeowners choose to “unofficially” transfer a loan, usually with a promissory note of some kind signed by both parties. However, going about a transfer in this way often does not hold up legally, since many mortgage contracts expressly forbid this. Therefore, the original borrower is still held responsible for monies owed.  A better option could be to work with your lender to see if it's possible to add another borrower/owner to the mortgage, which would enable them to make the payments on the loan.

If you are interested in transferring your mortgage, be sure to speak with both an attorney and your lender first to find out what the terms and requirements are.

Refinancing or modifying your loan may also be another option instead of transferring your mortgage over. Or you could work with your lender to see if it's possible to add another borrower/owner to the mortgage which would  them to make payments toward the unpaid loan balance. You could also sell the home and have a potential buyer, colleague, family member or another entity agree to make up any difference between the home's sale price and the unpaid loan balance. 

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