Can you transfer your mortgage to someone else? (2024)

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• You'll typically only be able to transfer your mortgage if your mortgage is assumable, and most conventional loans aren't.
• Some exceptions, such as the death of a borrower, may allow for the assumption of a conventional loan.
• If you don't have an assumable mortgage, refinancing may be a possible option to pursue.

Unplanned circ*mstances happen in life. If you're going through a divorce or unexpected illness, you might find yourself need to transfer your mortgage to another person. But can you?

The question of can you transfer your mortgage to someone else depends on the type of mortgage you have, and whether your lender allows it.

Some mortgage 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-on-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 mortgagewill let a borrower transfer the mortgage to someone else 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-backed mortgage (including FHA, VA, and USDA mortgages), you might have an assumable mortgage. If you have a conventionalfixed-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.

What is the due-on-sale clause?

The due-on-sale clauseis a provision in a mortgage contract that requires you to pay off your loan entirely if you decide to sell the property to someone else.

But a lender may allow a few exceptions that allow you to transfer your mortgage to another person without fully paying off the mortgage first. Some possible exceptions may include when:

• The borrower dies, and a family member is planning to take over the mortgage payments
• The borrower is transferring a mortgage to a spouse or child
• The borrowers are going through a divorce or separation, and one person is taking over the loan

Should you make a mortgage transfer?

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 rates are currently 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, it may make more sense to refinance.

What to do if a mortgage isn't transferable

If you have a conventional fixed-rate mortgage or your situation doesn't qualify for a transfer, 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 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 factorsif 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.

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