Taking a mortgage loan has been very popular with Canadians since the past century. However, the practice of Mortgage Transfer is not a very popular one.
Millennials are buying their first homes in large number and most of these first-time buyers are on credit either from a bank or a building society.
This is because a huge number of millennials don’t have money to buy houses or any other property cash.
Not only is this problem faced by the millennials even older people are faced with such a problem.
Mortgage vs Cash Purchase
Properties are bought for different reasons. Reasons can be for dwelling or commercial or passive income. For both individuals and businesses, it can be strategic to get a mortgage loan instead of renting a property.
This idea could even be more strategic for those businesses and individuals who are looking at making passive income from rent. The decisions of this nature are highly influenced by opportunity cost. One can have money to buy property cash but a question may arise that, is buying property cash more beneficial than buying on credit?
The onus will be that you prove mathematically and otherwise that the best option is to buy property cash or on credit. Real estate enthusiasts will tell you to buy on credit. I kind of agree with them on this. Buying a house on credit gives you more leverage on life as a whole.
If you are paying $2000 in rent expense then adding $500 premium to pay a monthly instalment on your mortgage loan will be ideal if you can afford to. The good thing about this is that your property will match your accumulated instalments at the end of the loan term or likely, beat it depending on the market behaviour.
What is Mortgage Transfer?
After buying your desired property on credit you might decide at a later stage that you want to transfer your property credit to another bank. This is what mortgage transfer is all about, a process whereby you assign an existing mortgage to another lender from your current lender.
This decision can be influenced by many things for example not being able to keep up with your month to month repayments, better interest from the other lender etc. There are three keynotes that you need to understand about mortgage transfer and these are;
- Not every mortgage loan can be transferred and that if your mortgage loan can be transferred then your lender has the right to approve the new lender that will be assuming the loan,
- Mortgage loans may have a clause that prohibits you from transferring your mortgage to a buyer,
- A transfer of mortgage is the reassignment of an existing mortgage, from you as a current holder to the person or entity
You will need capture these keynotes as they may/will be important on your mortgage. Understanding your current mortgage agreement will help you in the future should you want to transfer your mortgage. If you are going to shop for a mortgage loan make sure that there are no clauses that restrict you from transferring your mortgage to a buyer.
Step by step guide on how to transfer a mortgage :
Step 1: Search for a bank that you want to transfer your mortgage to
You need to choose a bank that you want to transfer your mortgage loan to, to do this there are many options. However, you need to do your homework.
You need to compare between different banks. Compare rates, benefits, and instalments from different banks. You can start your comparisons from the big 5 Canadian banks ( Bank of Montreal (BMO), Bank of Nova Scotia (Scotiabank), Canadian Imperial Bank of Commerce (CIBC), Royal Bank of Canada (RBC), and Toronto-Dominion Bank (TD)).
Getting value for your money should be your priority. So no compromise should be made. Get the bank that will offer you the best services.
Step 2: Call the bank
After making a selection of the bank that you want to transfer your mortgage to. The next step you need to take is to call the selected bank and make an appointment.
You need to set an appointment with a mortgage officer so that you can complete your mortgage application. Also, ask specific questions that you may not understand from their advert or website.
The officer will be able to explain all the nitty-gritty of the transfer that you want to make and added services and costs that come with the transfer.
Step 3: Show up to the appointment ?
You need to go for the appointment that you have set with the mortgage officer. Make sure that at this stage you have all the necessary documents needed to make a mortgage transfer to that bank.
Have documents such as your bank statement, the letter from your employer, proof of tax returns. If you are self-employed then take along your audited financial statements for the past 2 Years and tax returns.
Should you have debts that you are yet to settle then take the proof of such debt. Be open about your finances so that you can be assisted in a timely manner.
Step 4: Fill the application form ?
With the help of the mortgage officer fill the application form and make a submission. If the bank has an advanced computerized system in place the mortgage officer will be able to make an application for you.
In the process, the officer will run your credit profile. All your debt and income will be integrated in the screening process. The results will give the officer your financial data. The data will be a big factor in determining if you qualify for the mortgage transfer.
Step 5: Sign loan documents ✍
After you qualify, you can now sign the mortgage transfer documents to start the transfer process. There are closing costs that you will need to pay. These are title insurance, application fees, and attorney fees.
If you are looking to transfer your mortgage from the current lender to a new lender because of high-interest rate then you might consider asking for a revisit of your mortgage loan.
You can ask your current lender to decrease the interest rate to match competitors. Your current lender may consider this to keep you as a customer.
If you have signed a mortgage transfer contract and want to reconsider your options, you may have several days to revoke the contract depending on the bank that you have chosen.
You might incur a penalty for cancellation but before signing your transfer contract loan, you need to read carefully on how many days you have to revoke the contract and how much are the cancellation fees.