In general, transferring a mortgage is difficult.If you have an assumable mortgage, the new borrower would be able to pay a flat fee to assume the existing mortgage and all debt. Most government-backed loans, such as VA or FHA loans, are usually assumable. However, most other loans will not be assumable.
Transferring a loan is advantageous for the buyer, but not for the lender. A buyer could assume an older loan with much lower interest rates than the market currently offers. The buyer also usually avoids paying the closing costs usually associated with taking out a new loan on a property. Both of these are good reasons why many buyers want to assume old loans, but why many lenders are opposed to it.
For this reason, many loans include a “due on sale” clause. This means that if ownership of the property is transferred for any reason, the entire balance of the loan will be due immediately. You would need to repay the original mortgage in full, and the new buyer would then have to take out a new mortgage on the property.
However, it is possible to transfer a mortgage to an immediate family member without activating the due-on-sale clause. If you wish to transfer a non-assumable loan, your first step should be to contact your current lender. If the new trustee’s income and credit levels are equal to or better than yours, your lender will probably be inclined to help you transfer the mortgage. You may be able to transfer your interest in the property through a quitclaim deed, where you relinquish all ownership of the property to someone else.
Your lender may also agree to add another name to the mortgage. In this case, someone else would be able to legally make payments on the mortgage. However, your name will still be on the mortgage, and you will still be held responsible if for any reason payments cease on the loan.
If there is no legal way to transfer your mortgage to a family member, it may be tempting to set up an unofficial work-around, where another person pays the mortgage while your name is still on the loan. Be careful, as this is illegal under the terms of most mortgage contracts! In addition, you will still be the one held financially responsible should the family member cease making payments.