Transfer or assumption of mortgage

Transfer of mortgage

In some cases the seller may wish to purchase a new property but still have a balance to pay on the existing mortgage. Under certain conditions, the existing mortgage can be transferred, i.e. the terms of the existing mortgage, such as interest rate, mortgage payments and term, can be applied to the property to be purchased. A mortgage transfer means that the seller does not have to start the mortgage approval process all over again. This transaction can allow the seller to increase the amount financed.

Not all lenders allow mortgage transfer, and not all loan types are eligible.

For example, variable-rate mortgages do not normally qualify for a mortgage transfer.

It is also important to note that most financial institutions restrict the period for making the transfer to between 30 and 120 days. This timeframe may not be suitable for many sellers, as the period between the sale of their current property and the purchase of the next one often exceeds this limit.

Assumption of mortgage

If the seller leaves the property without needing a new mortgage, the mortgage may be transferable to the new buyer. In this case, however, the buyer must pay the difference between the sale price and the balance of the mortgage directly to the seller.
 

Example:

Selling price: $425,000
Mortgage balance: $300,000
Difference to be paid to the seller: $125,000