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Let's say I have a mortgage for a house I live in. I find another house and I like it better. Is it possible to take that mortgage I pay and switch the houses? And maybe pay some difference if the other house is more expensive.

Or what are the ways in switching houses similar way? This is in USA.

  • I would believe it is possible but the modalities will be decided by your lending bank. But willn't it mean selling your old house, closing out your old mortgage and taking out a new mortgage. I am not sure if the bank will allow to transfer your mortgage considering it lent you on the first house and it's existing condition then. – DumbCoder Dec 29 '15 at 15:18
  • so closing the first one and opening new one. But how can I close one if it's not paid off. This will only work if the property is bank owned? – Grasper Dec 29 '15 at 15:26
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    You close the first by paying it off. You pay it off by using some of the money you got from selling the house it is based on. Yes, you have to continue making mortgage payments until you pay it off. This is why we keep warning folks that a house is an illiquid investment at best, and that you usually shouldn't buy unless you expect to live there at least five years... and why the concept of a "starter house" is questionable ... and why it may make more sense to renovate than to move. – keshlam Dec 29 '15 at 15:54
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    If you can't sell or rent out the first, you may not have the combined money and credit to buy the second. The money has to come from somewhere. – keshlam Dec 29 '15 at 22:22
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    @Grasper - if you can't sell the first property, how can you expect to transfer the mortgage? If you owe $100K on property A and you want to buy property B for $125K, how do you think you can transfer the $100K mortgage from property A to property B without somehow paying off the $100K you owe on property A? If you buy property B before you sell property A then you technically have $225K of debt and you have to cover that debt somehow. – Johnny Dec 30 '15 at 5:50
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I've never heard of portable mortgages in the US. If you can't afford two mortgages, you will have to sell the first house to pay off its mortgage before you can buy the 2nd house.

This is done all the time in the US. You can put your current house on the market (advertise it for sale) then arrange for a long closing while you arrange to buy a new house. Also, you can make an offer on a new house and include a contingency clause that you must sell your current house first.

Good escrow companies are very good at managing cascading transactions like this.

  • Doesn't this mean you lose all the interest payments you made for the original property? So this is just a way for loan companies to screw the consumer, right? – Ricky Mason Nov 3 '17 at 15:45
  • Yes, but they loaned you a great deal of money to pay the sellers. They need to make a profit somehow. Hopefully, the property value had gone up so you get some cash that you can use in the next property. – mkennedy Nov 3 '17 at 15:50
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You're talking about porting your mortgage, which may be possible if your mortgage was portable to start with, or if your bank subsequently allows it.

Note that although porting a mortgage involves keeping most of the original terms and conditions, the process is still much like applying for a new mortgage, including any lending requirements.

Here's an article on the subject.

EDIT: In response to OP's comment below:

What will happen to the first property if I don't sell it?

Because porting a mortgage is treated as if you were closing one mortgage and opening a new one, this means that you would need to pay off the first mortgage.

Typically this would be done by selling the first property at the same time that you buy the second one. However, if you're not doing this, you'll need to raise funds another way, which could include opening a new mortgage on the first property (of course, if you're doing that, then there would have to be a good reason for porting the original mortgage; otherwise you might as well leave it where it is, and open a new mortgage on the second property instead).

Does the article apply the to USA too?

That article (and indeed this answer) are based on the situation in the UK. However, they appear to exist in the US too, though are rarer than in the UK.

  • what will happen to the first property if I won't sell it? Does the article apply to USA too? – Grasper Dec 29 '15 at 18:09
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    @Grasper You'll need to either keep the mortgage on the first house, or pay off the mortgage on the first house, or increase the amount borrowed on the mortgage. The bank will need to be sure they can get all their money back if you default. – Peter K. Dec 29 '15 at 20:15
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I'm answering your "or what are the ways of switching houses?" question...

The most common way that I've done this for a personal residence is with the following steps:

  • Find new house
  • Offer on new house, made contingent on sale of old house
  • Sell old house
  • Title company handles funds of both transactions
  • Old property closes
  • New property closes, with any equity from transaction of old house applied as down payment for new property.

What I think you may really be asking is, "how do I juggle the fact that I want to move to a new house but I have a current home and mortgage?

Two key pieces of the process are:

  1. Negotiating your new property transaction to allow for you to find a buyer for your existing property. It's not impossible, but it is certainly added risk for the seller, and it may impact your ability to negotiate.
  2. In most west coast states, the title company actually handles the funds to ensure that the transactions all close properly.

Hopefully that helps--plenty of people make their next home purchase contingent on the sale of an existing property.

  • One more comment: if you have had any increase in the value of your existing property and it's your main residence, you should look into a 1031 exchange. (But that's another question!) – THEAO Dec 31 '15 at 7:47
  • 1031 exchange is NOT for a main residence--only for investment properties (like a rental house or a business property). – mkennedy Dec 31 '15 at 21:24
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I would just do a loan for a different number of years on your new mortgage. For example, if you just spent 10 years paying off your first house, then for your second, close the first mortgage upon selling, and then open a 20 or 25 year mortgage and the loan end date as well as the payment should remain similar. This would be more do-able if you paid ahead a little to compensate all the early on interest you have to eat.

So if you want to finish around the same time, you could look into doing that since you'll have more equity to make a stronger down payment.

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That is called "substitution of collateral." And yes, it can be done, but only with consent of the lender.

The "best case" for this kind of maneuver is if the second house is larger and more valuable than the first. Another possibility is that you have two mortgages on the first house and none on the second, and you want to move the second mortgage on the first house to the second one, effectively making it a "first" mortgage. In these instances, the lender has a clear incentive to allow a substitution of collateral, because the second one is actually better than the first one.

The potential problem in your case, is if the second house were more expensive than the first house, you could not use the sale proceeds of the first house as to buy the second house without borrowing additional money. In that case, a possible solution would be to go back to the lender on your first house for a larger mortgage, with the proceeds of that mortgage being used to retire the earlier mortgage. Depending on your credit, payment record, etc. they might be willing to do this.

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No. You have to reimburse the current mortgage you have and negociate a new one for your new house. A mortgage is a loan from a financial institution that accepts to give you money if you pay it back the total amount adding interests. Interests are the price you pay to the financial institution for it to give you money for a while. In the mortgage you have an legal agreement with the financial institution on how to reimburse the total amount that is given to you for a while. Breaking that agreement is breaking the law. The fact of the matter is that when 30% of your mortgage is reimbursed, the financial institution own your house, legally, for real, at 70%: your live in the house own by the financial institution at 70%. It is the same exact logic for a car loan. The mortgage goes with a specific house at a legal address that you live in as a primary residence.

  • Do you have any reference to back up your claim? I got the answer about the portable mortgages and that allows it. – Grasper Dec 29 '15 at 18:18
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    "the financial institution own your house, legally, for real, at 70%". That's not true, at least in the US and England & Wales. From Wikipedia: "the debtor remains the legal owner of the property, but the creditor gains sufficient rights over it to enable them to enforce their security, such as a right to take possession of the property or sell it." – Steve Melnikoff Dec 29 '15 at 20:32
  • There are liens and titles, and these are different things. It's the case in car loans that the consumer owner is named on the title, and the lender physically holds the title. This does not mean the lender owns the car. In home loans, the title and liens are registered by a local government. The lien and mortgage terms allow steps for the lender to press a claim, but until this is done the lender does not own the asset. I am curious what US jurisdiction operates the 70% rule described here. – user662852 Dec 30 '15 at 16:01

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