Moving homes but don't want to give up the excellent interest rates you have on your current mortgage? Mortgage transfer is the solution for you. In this guide, we'll explain exactly how to execute the process, in which cases it's worthwhile, and how to avoid costly mistakes.
Schedule a ConsultationIn the field of mortgage consulting, one of the most important concepts for home upgraders is "mortgage transfer." Simply put, this is a process where you transfer your existing mortgage loan from the old property (which you're selling) to the new property (which you're buying), while maintaining the original loan terms.
During periods when market interest rates rise, your old mortgage becomes a financial asset in itself. If you took out a mortgage several years ago at near-zero interest rates, paying it off and taking a new mortgage under current market conditions could cost you hundreds of thousands of shekels over the life of the loan. Mortgage transfer allows you to "drag" the good terms, margins, and interest rates to your next property.
The main reason for performing a transfer. If the interest rates on your current mortgage are significantly lower than the rates currently offered in the market, a transfer will save you substantial money on monthly and total interest payments.
In certain tracks, early repayment of the mortgage involves an early repayment fee (penalty) that can reach tens of thousands of shekels. Mortgage transfer prevents this taxable event and saves the penalty.
Sometimes the old mortgage includes special benefits, cheaper mortgage insurance, or indexation terms that no longer exist in the market. Transfer allows you to preserve the entire loan "package."
The transfer process can be executed in three main ways, depending on the timing of selling the old apartment and purchasing the new one. As part of mortgage consulting for home upgraders, we match the right route to your specific situation:
The ideal but most complex situation to execute. The mortgage transfer is performed on one day when you sell the old apartment and buy the new one. The money from your buyer goes directly to the seller of the new apartment, and the lien is exchanged. Requires perfect coordination between all parties.
If you've already sold the old apartment but haven't yet purchased a new one, the bank allows you to "freeze" the mortgage. The money from the sale is deposited in the bank as collateral against the mortgage, until you find a new property and mortgage it. This is an excellent way not to lose the terms during the interim period.
The most common case among home upgraders. You've purchased a new apartment from a contractor or second-hand, but haven't yet sold the old one. In this case, you can transfer the mortgage to the new property even before removing the lien from the old one, usually through the use of a bridge loan or temporary bank guarantee.
Mortgage transfer isn't always the right move. Sometimes, mortgage refinancing and improving terms might be more worthwhile, even if interest rates have risen. When does this happen? When your original mortgage mix isn't optimal, or when your financial needs have changed fundamentally.
For example, if your original mortgage is index-linked and the index has risen significantly, the principal may not have decreased as you expected. In such a case, building a new and more stable mix (even at a higher nominal interest rate) might be a smarter long-term move. Additionally, sometimes banks create bureaucratic difficulties for transfers to encourage customers to take a new loan at higher interest rates.
Even if you've decided to transfer the mortgage, you'll likely need to add additional money ("mortgage supplement") for the new and more expensive apartment. The bank will price this supplement according to current market interest rates. This is exactly where a mortgage advisor can negotiate for you and secure better terms on the new portion, while preserving the old portion.
Analysis of the existing portfolio against new market offers to ensure that transfer is indeed the most profitable step.
Obtaining approval from the bank for the mortgage transfer and for the additional amount required (if needed).
Conducting an appraisal of the new property to ensure it can serve as adequate collateral for the mortgage.
Signing the transfer documents, updating insurance policies, and transferring the funds.
The mortgage transfer process requires expertise and precision to maximize savings. Ariel Achon's team is here to guide you through a safe, professional, and profitable process.
Contact us today