When dealing with homeownership, one question that may arise is, “Can you transfer a mortgage to someone else in Canada?” Whether due to life changes like a divorce, job relocation, or simply wanting to offload a property, mortgage transfers can be an appealing option. This article provides a comprehensive guide to transferring a mortgage in Canada, including its feasibility, the process involved, alternatives, and important considerations.
What Is a Mortgage Transfer?
A mortgage transfer occurs when an existing mortgage is passed from the current homeowner to another individual. The new person takes responsibility for the loan, including its remaining balance, interest rate, and terms.
Key Features of a Mortgage Transfer:
| Feature | Explanation |
|---|---|
| Transfer of Debt | The new owner takes on the mortgage debt. |
| Retention of Terms | The interest rate and mortgage terms remain the same. |
| Property Ownership Shift | Ownership of the property is transferred to the new party. |
Mortgage transfers may seem straightforward, but they are subject to the approval of your lender and depend on the type of mortgage you have. Not all mortgages are transferable.
Is It Possible to Transfer a Mortgage?
Yes, it is possible to transfer a mortgage, but it depends on the type of mortgage you hold and your lender’s policies.
- Assumable Mortgages
Certain mortgages are designed to be assumable, meaning the mortgage can be transferred to another person. However, this is more common in fixed-rate mortgages and less common in variable-rate mortgages. Lenders typically impose strict eligibility criteria, including a full review of the new borrower’s financial situation. - Non-Assumable Mortgages
If your mortgage is not assumable, your lender will likely require the new homeowner to apply for a completely new mortgage. In this case, the original mortgage cannot be transferred directly.
Factors Determining Mortgage Transfer Eligibility:
| Factor | Details |
|---|---|
| Lender’s Policies | Some lenders allow mortgage transfers, others do not. |
| Mortgage Type | Fixed-rate mortgages are more likely to be transferable. |
| New Borrower’s Credit | The new borrower must qualify under the lender’s criteria. |
| Property Appraisal | The property may require reappraisal for the transfer. |
How to Transfer a Mortgage
If you find that transferring your mortgage is an option, here’s the step-by-step process:
1. Review Your Mortgage Agreement
The first step is to check your mortgage agreement to see if it includes a portability clause. This clause allows for the transfer of the mortgage. If your mortgage is assumable, it will be explicitly stated in your contract.
2. Get Lender Approval
Once you’ve reviewed the contract, you’ll need to get your lender’s approval for the transfer. They will assess the financial credentials of the new borrower, including their credit score, debt-to-income ratio, and other financial metrics.
3. Conduct a Property Appraisal
Your lender may require a new appraisal of the property to determine its current value. This step ensures that the mortgage still aligns with the home’s market value.
4. Legal Documentation
Both parties—the current homeowner and the new borrower—will need to sign legal documents transferring the property and mortgage. A real estate lawyer is typically required to manage this process.
5. Pay Transfer Fees
There are often transfer fees involved. Depending on the lender, these fees could range from $500 to $1,500 or more. Ensure that both parties understand the costs involved in the transaction.
Mortgage Transfer Alternatives
If your mortgage cannot be transferred, or the new borrower cannot meet the lender’s requirements, there are alternative options to consider:
1. Sell the Property
The most common alternative is to sell the property and have the new buyer apply for their own mortgage. The proceeds from the sale can be used to pay off the current mortgage.
2. Refinance the Mortgage
Refinancing allows the current homeowner to restructure the mortgage, either by adjusting the loan terms or adding a co-borrower who will share responsibility for the payments.
3. Mortgage Porting
Mortgage porting is the process of transferring an existing mortgage from one property to another. This option can be useful if the original borrower is moving to a new home but wants to retain the same mortgage terms.
| Mortgage Transfer Alternatives | Description |
|---|---|
| Sell the Property | The new buyer applies for their own mortgage. |
| Refinance | Adjust the loan terms or add a co-borrower. |
| Port the Mortgage | Transfer the mortgage from one property to another. |
Be Careful with Unofficial Transfers
It is important to avoid any unofficial mortgage transfer agreements. Some homeowners may attempt to transfer ownership of a property while keeping the mortgage in their name. This can lead to legal complications and, in worst cases, foreclosure if the new homeowner fails to make payments.
Always go through a lender-approved process and ensure that the transfer is legally documented.
Frequently Asked Questions (FAQs)
1. Can any mortgage be transferred in Canada?
Not all mortgages are transferable. Fixed-rate mortgages are more likely to be transferable than variable-rate ones, but the decision ultimately depends on your lender.
2. Do I need a lawyer to transfer a mortgage?
Yes, a real estate lawyer is typically required to facilitate the legal aspects of transferring both the property and the mortgage.
3. What costs are involved in transferring a mortgage?
Transfer fees can range from $500 to $1,500 or more, depending on the lender. Other costs may include legal fees and appraisal costs.
4. Can I transfer a mortgage to a family member?
Yes, but the family member will still need to qualify under the lender’s requirements, including income verification and credit score checks.
5. Is mortgage refinancing an alternative to transferring a mortgage?
Yes, refinancing is often a viable alternative, allowing the homeowner to add a co-borrower or adjust the mortgage terms. Read more here
