What is mortgage loan transfer?
The transfer of credit is a practice that allows you to keep your home mortgage if you sell or buy a home. Concretely, rather than pay your current credit and buy a new one for your new home, you can transfer your current credit. countrycrossroads.org for an assessment
Warning: the transfer of mortgage is possible only if your loan agreement mentions it. To be able to make a loan transfer, your contract must contain a specific clause. At the signing of your offer, it is therefore important to check this point to give yourself the opportunity to make a loan transfer in the future.
The transfer of credit is very common in the United States and Canada, while in France the practice is rather rare. Still, transferring a home loan can be a particularly economical solution!
Real estate loan transfer
The transfer of real estate credit offers many advantages, starting with the issue of fees. If you opt for early repayment or if you subscribe to a new mortgage, expect to pay a significant fee. The same goes for people who opt for the mortgage.
On the contrary, with a credit transfer:
- You do not pay a penalty fee;
- Processing fees are low or non-existent;
- The costs of release at the notary are nonexistent because your deposit or your mortgage is also transferable from one purchase to another;
- Administrative procedures are reduced.
And most importantly, you can keep your initial borrowing rate. An opportunity if loan rates have risen since your credit rate is not revised upwards. On the other hand, if the rates have gone down, the deal is not good, and maybe it’s better to turn to early redemption.
The home loan transfer also has some limitations that one must be aware of. Today, the operation is advantageous only if the credit is recent. Indeed, for several years, the rates are low: the people who have an old property credit thus have any interest to well compare the options. For these profiles, taking out a new credit may be more beneficial than transferring your credit.
Another point to keep in mind: your bank has the right to refuse you a credit transfer.
Conditions of loan transfer in the contract
To be able to make a transfer of a mortgage loan, it is essential that this possibility be mentioned in your contract. At the signing of the offer, it is therefore strongly recommended to ensure the presence of this clause in your contract. If the clause is not in your loan, you have the right to make a request to your bank advisor.
Also, be aware that your bank or credit institution may set special conditions for loan transfer. A transfer of real estate credit can indeed be accompanied by costs or be possible only in certain cases.
Other conditions to respect
Also, note that most lending institutions limit loan transfer to certain conditions:
- The cost of the new home must be at least greater than or equal to the remaining principal of your first home loan;
- The loan transfer must be used for the same types of housing: one main residence for another, one secondary residence for another …;
- The time between the sale of the first home and the purchase of the second home must be short, a few months at most.
Make the right choice for your mortgage loan transfer
You hesitate to subscribe to new credit and transfer your mortgage? To make the right choice, you must consider both possibilities and weigh the pros and cons. Thus, you will be able to choose the most economical option to acquire your new property.