Let’s assume that thanks to a mortgage we have already bought the property that interests us. But what to do if after a few years it ceases to suit us? And what about the loan that you still have to pay back and which we took for 20 or 30 years? The solution is to transfer the mortgage to another property. We advise on how to do it and explain what formalities we will have to take care of
Transferring a mortgage – how does it work?
Currently, most people have a mortgage on their account. What to do if we want to change the credited apartment for a larger, or move? Will we be prisoners of mortgage for several dozen? Not necessarily. We have several options to choose from that will help us to “free ourselves” from it. One option is to transfer the mortgage to another property.
To put it simply, it means that as part of the loan already granted, we will pay back the new apartment. However, we should remember that the bank must agree to this solution and draw up an annex to the contract. Without his consent, we will not be able to sell the loaned property or change the collateral. We should also bear in mind that such a solution involves additional formalities and … fees.
If the property bought earlier for a loan has ceased to be sufficient for various reasons, … we can exchange it for another one. Assuming that we are not going to resign from the granted loan, we are left with the mortgage burden on the new premises. For this purpose, during the loan agreement, we must apply to the bank for collateral on another property. The one we ultimately plan to buy.
Transferring a mortgage to another property is not always possible. This requires a valuation of the property that would become a new collateral and signing of an annex to the contract. The bank will once again examine our creditworthiness and “x-ray” us as if we were applying for another loan. Thus, he may ask us to provide bank account statements, income statements, cost of living etc.
Transferring a mortgage to another property – conditions
A borrower who wants to sign an annex to the contract and change the form of security must meet certain conditions set by the bank. First of all, the value of the new property may not be lower than the one previously pledged. In addition, the new premises cannot be charged with a mortgage, debts or other obligations. The aforementioned valuation and presentation of an excerpt from the land and mortgage register will also be required (if any). We must submit an application for a mortgage transfer to another property. In order for the bank not to reject our request in advance, the owner of the property may not be changed.
We should remember that the loan is granted for the purchase of a specific premises, hence it is an integral part of it until the liability is paid in full. If we stop being the owners of real estate, then credit will no longer be our concern.
At the stage of analyzing the application for the transfer of the mortgage, the bank will ask us for additional documents, e.g. photos of the property. We are also waiting for:
– signing the preliminary contract for the purchase of a new M,
– re-analysis of creditworthiness,
– providing an excerpt from the land and mortgage register of this property, which is to become a new loan collateral,
– preparing an application in which we specify what changes we want to make in the loan agreement,
– delivery of documents related to the legal status of real estate,
– valuation of the property, which will become a new collateral (it is needed to determine the parameters of the loan after the contract change).
These conditions are a standard procedure when we are interested in transferring a mortgage to another property. Obviously, a change in the form of security translates into a change in the terms of the contract.
How much it costs?
If the bank agrees to transfer the mortgage to another property, the annex will significantly reduce our portfolio. It may cost from several hundred to tens of thousands of dollars. Such high fees are associated with the fact that some banks charge a commission for this type of operation, the amount of which depends on how much credit we have to pay. The annex is not the only expense. We will also have to pay for the re-valuation of the property.
The costs of such valuation range from USD 200 to 1,000. In addition, the bank will charge us fees for all activities that it will have to perform when analyzing our application. Fortunately for potential customers, most banks apply a unified fee here, which does not exceed USD 1,000.