The latest way investors are coping with high interest rates?

if you have ever seen StarCraft, you will become familiar with the concept of “teleportation,” whereby the crew of the Starship Enterprise is moved from one location to another without having to use inconvenient transportation (walking, driving, piloting a spaceship) to get there. Mortgage transfer works the same way: go through Transfer your low-rate mortgage from one home to another without refinancing or changing lenders.

If the idea sounds as far-fetched as Captain Kirk’s alien romance, that’s because U.S. lenders don’t seem to allow mortgage transfers. However, mortgage transfers are available in Europe and Canada, as are some Canadian banks offering loans in the United States-Excellentyou can see where this is going.

What is mortgage transfer?

First, let’s get a full Learn what mortgage transfer is. Mortgage transfer allows you to transfer an existing mortgage from one property to another, with the same lender and on the same terms, subject to certain conditions. Those are:

• The cost of a new home is equal to or higher than the one you sold.
• The proceeds from the sale of your previous home will be used to pay off the loan on that home.
• You apply for a new mortgage for your new home and must get approval to “transfer” your old mortgage. You must meet new mortgage lending standards, including having a mortgage that is high enough credit score and the one on the right debt to income ratio.

Reasons for mortgage port

In an era of high interest rates, mortgage transfers are a given. It allows people to:

• move house to house and keep their low interest speed.
• Create liquidity in the housing market so homeowners are not locked into interest rates.
• Eliminate upfront fees and possible origination costs associated with switching from one bank to another.
• this Allow borrowers to borrow more money money If they take out a second loan to make up the difference in the price of a new, more expensive home.

All of this sounds great in theory, but at the time of writing, it appears Lenders in the United States do not support mortgage porting.

“Qualifications for transferring a mortgage vary and you never know what you’re going to get,” said James Allen, financial adviser at Billpin. real estate agent network. “Some lenders allow it, some don’t. And not all mortgages are transferable.

However, neither Allen nor Realtor.com specified which banks allow this. “If the mortgage amount you need to buy a new property is larger, your lender may offer you a ‘hybrid and extension’,” Allen continues. “It’s like mixing old and new rates, and you end up with a rate that’s a mix of the old rate and the current rate.”

Steps to take if you want to transfer your mortgage

The first step is to talk to your lender. There is a lot of conflicting information on reputable websites. Some, e.g. Forbes website and Realtor.com, suggesting that it is possible to transfer a mortgage in the United States But mainstream lending sites For example Bank of America, Chase or Wells Fargo do not do this suggestion this.

Canada’s warning

Canadian banks, such as Royal Bank of Canada Mortgage transfer allowed and provide Cross-border banking In the United States, its website markets the product to Canadian residents. However, an RBC representative told BiggerPockets that U.S. citizens who can obtain mortgages through RBC’s U.S.-based banks will be eligible for a mortgage port when they plan to move.

hypothetical mortgage

Hypothetical mortgages are the closest thing that mainstream U.S. banks have to a mortgage transplant. Quote Bank of America website:

“Home Loan Assumption allows you, the buyer, to assume responsibility for existing debt secured by the mortgage on the home you are purchasing. Two processes that may suit your needs are Qualified Assumption and Name Change and Title Transfer Requests.

Qualifying presumptions are the most common of the two, and like transfer mortgages, they require the person assuming the mortgage to qualify for the loan. Name Change and Ownership Transfer Request Assumptions Commonly used When someone’s parent dies and they wish to take on the mortgage rather than sell the home.

Subject to transaction restrictions

Although Trading Topics Also very popular recently, somewhat similar to mortgage assumptions, they have become increasingly controversial Because they violate the bank’s maturity-on-sale terms and are inherently riskier, operating in a legal gray area.

final thoughts

Mortgage transfers make sense for both home buyers and sellers, including investors. Not surprisingly, Bank of America, worried that it wouldn’t have any new high-interest loans on its books, was reluctant Get on board.

However, in the bigger picture, encouraging people to sell their homes without fear of losing out on low interest rates creates momentum in the market, which will also free up inventory for first-time home buyers, flippers, they would buy a house at current interest rates, thereby borrowing money from the bank and making money. It’s a creative, logical solution to keep real estate transacting during challenging times. Once interest rates fall, Canadian banks may find themselves with more U.S. borrowers.

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Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.