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Changing or Transferring Ownership of a Home

major life events

Major life events, like death or divorce, often result in changes to the ownership of a home. It may be transferred to a new owner, or one of the named borrowers, such as an ex-spouse, may be removed from the mortgage. Transfers like these typically require refinancing the mortgage or selling the property. But, in certain situations, there may be other options.

Refinancing is not always necessary

When a property with a mortgage changes ownership, most conventional mortgages require refinancing. That means paying off the balance of the existing mortgage and replacing it with a new loan with new terms.

Refinancing involves an application and approval process for the new borrowers, with associated fees. Depending on the current market conditions, it could also mean a higher interest rate and higher monthly payments. But if the change in ownership is due to certain “protected” situations — such as death or divorce — refinancing, and its potential downsides, may not be necessary.

refinancing isn't always necessary

Ask about your options

Every situation is unique. If you’re thinking about transferring a property or acquiring a transferred home, talk to the mortgage servicer about your options and rights.

Transferring ownership in special cases

For certain types of ownership transfers — referred to as protected or exempt — immediate repayment and refinancing of the mortgage is not required, and the new owner can continue making payments on the existing loan.

These situations include:

  • Death: The property is inherited by a relative of the existing borrower.
  • Immediate family: The borrower’s spouse or children become owner(s) of the property.
  • Divorce or separation: The property is transferred to the former spouse of the borrower.
  • Trust: The property is transferred into a living trust where the borrower is a beneficiary and does not relate to a transfer of rights of occupancy.
transferring ownership

If you acquire a property through a protected transfer and choose to continue paying the existing mortgage loan, you’ll have certain legal rights related to the mortgage loan, such as the right to request information about the terms of the loan and the right to challenge errors. You also have the right to receive notice if the loan is delinquent — including available workout options — or if the loan is sold or transferred.

Assuming a mortgage loan

If you become an owner of a home due to a death, divorce, or other protected scenario, you may have the option to assume the existing mortgage.

Assuming a mortgage means taking on financial responsibility as the new owner of an existing mortgage loan. Usually, the terms of the assumed loan — such as the interest rate, monthly payment, and repayment period — stay the same even though the named borrower changes. Compared to refinancing, this can potentially save you money if the existing interest rate is lower than you could get with a new loan. Loan assumption fees are also typically lower than the cost to refinance.

Note: Conventional fixed-rate loans may only be assumed in the special situations described. However, adjustable-rate mortgages (ARMs) and government-insured mortgage loans — like FHA, VA, or USDA loans — do not have the same restrictions and may be assumed by anyone who acquires the property.

Contact the loan’s mortgage servicer to find out if you’re eligible to assume the loan and learn about the associated costs.

Release of liability for other borrowers

When assuming a mortgage loan, you may also wish to remove existing borrowers — such as a former spouse or deceased relative — from the mortgage loan to end their financial obligation. To do this, you can request a release of liability for those borrowers from your mortgage servicer.

Generally, an existing borrower will not be released from liability by the mortgage servicer unless the new borrower qualifies to take over loan payments after a financial and credit evaluation.

mortgage services

Talk to your mortgage servicer

Changes to a property’s ownership and mortgage can be complex. Ask your mortgage servicer to explain the available options for your specific situation.

Frequently asked questions

A transfer of ownership is when a property — or interest in a property — is sold or transferred by the current property owner to a new owner.

A mortgage assumption is when a new owner takes on responsibility for a property’s mortgage loan and is named as a borrower on the mortgage note.

Note: Only certain types of mortgage loans are assumable and assuming a loan does not automatically result in the release of liability for an existing borrower.

A release of liability is the removal of an existing borrower from their obligations on a mortgage loan.

Not necessarily. Although refinancing the mortgage loan is one way to remove an existing borrower, the spouse keeping the home after a divorce or legal separation has other options. They can choose to continue paying the mortgage as-is or assume the mortgage and request a release of liability for their ex-spouse. To fully assume the loan and remove the ex-spouse as an owner, the remaining spouse must be credit qualified by the mortgage servicer.

Talk to your mortgage servicer about options to make your mortgage payments more manageable, such as refinancing or modifying the loan.

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