Transferring a mortgage can bring many benefits for property owners and prospective buyers. But there are a few things to bear in mind. The following article should give you a broader picture and provide an overview of the options and requirements when transferring a mortgage.
Fundamentally, a mortgage is always linked to a property.
Perhaps you want to sell your property despite an active fixed-rate mortgage. The reasons may vary – moving house, emigrating, illness or divorce. These can all lead to you wanting to sell the home you own while the fixed-rate mortgage is still active.
The answer to the question “Can I transfer my existing fixed-rate mortgage?” is “Yes”. But the decision doesn’t just lie with you; you also need the approval of your lender. This transfer moves the existing financing to a new property. If you sell the property the financing relates to and take the loan with you, the following preconditions must be fulfilled:
As you take your financing with you and don’t have to pay it off in advance, you don’t pay a prepayment penalty. You might also be able to increase the selling price of the property, as people who are interested don’t have to take on any existing financing.
The loan is transferred to your new property so new conditions must be arranged, as this is a new financing agreement.
As a mortgage is linked to a plot and the property on it, it can be transferred to the new owner when the property is sold. Together with your prospective buyer, you can decide whether they want to take on the existing financing. You could make this transfer appealing to the people buying your property by lowering the selling price, for example. But beware: the lender must approve the buyers in this transfer scenario, too, and check whether their financial situation is sufficient for them to take over the mortgage.
If you sell your house together with a fixed-rate mortgage, you don’t have to pay a prepayment penalty. This might save you several thousand francs. Also, you can renegotiate the financing for your new property, possibly at better conditions.
Without the prepayment penalty, the property profit from the sale will be higher, and you’ll have to pay more real estate gains tax.
If financing is repaid early, a prepayment penalty arises. As the financial institution has established a contractually fixed duration and a payment plan with interest, a penalty must be paid in the case of any early dissolution of that contract, depending on the market conditions since the mortgage was taken out. The amount of any penalty must always be calculated individually, as the remaining time to maturity, the interest rate and the loan amount all play an important role. Be sure to obtain all the important information before you decide on transferring or paying off a mortgage, and select the option that is the most beneficial to you financially.
If, after all calculations and considerations, you come to the conclusion that you would rather pay off the mortgage and pay the prepayment penalty, you should always check for any possible tax deduction. A Federal Court ruling from 2019 defined the following principles:
Before you sell your house, do you want to check which options you have for new financing? Come and see our experts for a personal consultation in the branch of your choice.
The mortgage is linked to the house. So if you want to sell your house but it’s linked to financing, you can make the transfer appealing to potential buyers by allowing some room for negotiation in the selling price.
The financing is inherited with the property. This means that if someone inherits a property or real estate after a death, the mortgage and payment obligations associated with it are inherited, too.
This depends entirely on the type of gift. Gifting while still alive has different preconditions if it is linked with a right of use and a right of residence. These factors can also have an impact on the mortgage.
If you want to buy a property that’s financed with a mortgage, you can decide whether to take this over or not. There can be financial benefits to taking over the financing. For example, you can negotiate the property purchase price with the seller.
