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Can You Transfer a Mortgage to Another Person? A Homeowners Guide
HomeLight
Real Estate
11 months ago
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Whether planned or unexpected, life changes may have you pondering, “Can you transfer a mortgage to another person?” It’s a relevant question, especially in times when mortgage interest rates and home prices are high.

Whether you’re considering a transfer to a family member in a better financial position, dealing with the intricacies of a divorce, or facing the somber task of managing a property after a loved one’s passing, a mortgage transfer — or allowing someone to “assume” your mortgage — may be the solution you’re looking for.

In this guide, we’ll review what it means to transfer a mortgage, helping you make informed decisions about your home loan or home sale.

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What does it mean to transfer a mortgage?

Transferring a mortgage, simply put, means passing the responsibility and rights of your home loan from you to another person. This is also referred to as “assuming” a mortgage. This process involves a new borrower taking over the existing mortgage under its current terms, including the remaining balance, interest rate, and repayment period. It’s not about creating a new mortgage but rather handing over the reins of the existing one.

By transferring a mortgage, the original borrower is typically released from their obligations, while the new borrower steps into their shoes, assuming all future payments and liabilities. This arrangement can be particularly appealing in times of high interest rates, as it can allow the new borrower to benefit from the potentially more favorable terms of an existing loan, rather than securing a new, higher-rate mortgage.

Is my mortgage transferable?

Determining whether your mortgage is transferable largely depends on the type of loan you have.

“There are certain mortgages that are not assumable [transferable],” says Eric Broesamle, a top Michigan real estate agent who has been helping homeowners for more than 20 years. “That’s something that you would need to find out first.”

Here’s a list of common mortgage types and their potential for transfer:

  • FHA loans: These are typically assumable. As long as the person taking over the loan meets the lender’s credit and income requirements, an FHA loan can be transferred.
  • VA loans: Also generally assumable, VA loans can be transferred to another eligible veteran or even a non-veteran — if they qualify. However, the process involves specific VA requirements and approvals.
  • USDA loans: Similar to FHA and VA loans, USDA mortgages are often assumable. The new borrower must meet USDA’s eligibility criteria.
  • Conventional loans: These are usually not assumable. Most conventional loans come with a “due on sale” clause, which requires the loan to be paid in full if the property is transferred. (More on this in an upcoming section.)
  • Adjustable-rate mortgages (ARMs): The ability to transfer these loans varies. While some ARMs may allow for assumption, you’ll need to check the specific terms of your loan agreement.
  • Other loan types: Some other loan types may have specific clauses or terms regarding assumability. It’s essential to review your loan documents or consult with your lender.

Broesamle explains that “With the current high interest rates, [transferring a loan] is a great way to maintain a lower rate mortgage… It’s an excellent tool for this market.”

However, he cautions, even if your loan type is typically assumable, individual loan agreements may vary. Always check with your lender and review your mortgage documents to understand your specific situation. You should also know your home’s value before you agree to transfer a mortgage.


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