There are several reasons why you may potentially have to transfer your home loan to another person. For example, if you own a property jointly with your spouse, ownership will change in case of a divorce. Or, if the owner is seriously ill or has passed away, change in the ownership may be required. If you purchased a home jointly with a family member or friend, later on your financial situation may allow you to buy out the joint owner, which also requires a change in the ownership.
Property ownership is also transferred in case of a sale. However, in this case your home loan won’t be transferred to the new buyer.
Transferring the home loan to another person
When your home’s ownership changes, you may need to transfer the home loan from one person to another. However, this transfer is not possible without the lender’s consent. The financial institution will need to ensure the new borrower is not unsuitable for the existing loan. It is best to find out more about how to transfer a home loan to someone else from your lender.
Property ownership transfer charges
Lenders may allow home loan transfer to another person when the property ownership changes. However, there are some charges related to such ownership transfer, which may include:
- Stamp duty, calculated on the land valuation
- Capital gains tax (CGT) may apply if the transfer is for an investment property
- Transfer of property ownership modifies the mortgage conditions and may entail break fees, especially if you have a fixed interest rate
You may also have to incur valuation and legal fees if the services of a lawyer are required.
Home loan portability
Do you know how to transfer a home loan to a new property? Lenders may allow you to transfer your home loan to another property via loan portability.
If the new property meets the same eligibility requirements as the old house, lenders will allow you to transfer the loan. The most significant advantage of loan portability is that it avoids refinancing and saves you the trouble of closing the existing loan and applying for a new loan. Moreover, you are able to retain the benefits and features of your existing loan.
While you save on establishment and exit fees, the lenders may levy a loan portability fee. An important thing to remember is that the lender will not allow you to modify the loan structure. This means lenders may not allow home loan transfer from one person to another while transferring the mortgage to a new property.
If there is an outstanding home loan on a property you want to transfer, you will have to notify the lender about the ownership change. You may have to agree to specific alterations to the existing loan documents. You may consult an expert to know more on how to transfer home loan from one person to another.