A mortgage transfer involves legally moving both property ownership and loan responsibility. What an alienation clause means for property transfers is crucial: most mortgages include this “due-on-sale” provision, allowing lenders to demand full repayment if ownership changes without consent. While typically restricted, transfers are possible with assumable loans (FHA, VA, USDA) or through legal exemptions like transfers to spouses, children upon death, or into living trusts. Understanding these clauses and consulting your lender or legal professional is vital to navigate property transfers effectively.
Understanding the Basics: What Is a Mortgage Transfer?
A mortgage transfer involves legally transferring both:
- The ownership of the property, and
- The financial responsibility for the mortgage loan to another party.
It’s important to note that transferring the deed (ownership) does not automatically transfer the mortgage. The person receiving the property must also be approved to take over the loan, unless specific exemptions apply.
Why transfer a mortgage to a family member?
- To help adult children become homeowners
- To prepare for the future through estate planning
- To divide assets during divorce
- To relieve the original borrower of financial burden
The Key Legal Barrier: The Alienation Clause
Most mortgages — especially conventional loans — include a “due-on-sale” clause, also known as an alienation clause.
What does it do?
It gives the lender the right to demand full repayment of the mortgage if ownership of the property changes without the lender’s consent.
Example:
You want to transfer your mortgaged home to your son. If your mortgage has an alienation clause, the lender could require the entire balance to be paid off immediately — unless the transfer meets specific exceptions.
Situations Where a Mortgage Transfer May Be Possible
Despite restrictions, certain transfers are allowed under specific circumstances or loan types. Let’s explore the most common ones:
1. Assumable Mortgages
An assumable mortgage allows the new owner to “assume” responsibility for the current loan, continuing with the same terms (
, balance, etc.).
Which loans are assumable?
- FHA Loans (Federal Housing Administration)
- VA Loans (Veterans Affairs)
- USDA Loans (U.S. Department of Agriculture)
- Rarely conventional loans — unless specifically stated in the contract
Pros:
- Retains existing low interest rate
- Lower closing costs than refinancing
- May be faster than a new mortgage application
Cons:
- Requires lender approval
- Assumee must meet income and credit qualifications
- The original borrower may remain liable if not released by lender
2. Transfers Allowed by Law (Estate Planning)
Under the Garn-St. Germain Depository Institutions Act of 1982, certain transfers are exempt from triggering the due-on-sale clause, including:
- Transfer to a spouse or child upon the borrower’s death
- Transfer to a living trust (if the borrower remains a beneficiary)
- Transfer during divorce or legal separation
- Transfer to a relative due to the borrower’s incapacity
Real-world example:
You place your home in a revocable living trust and name your daughter as successor. Upon your death, the property passes to her without requiring immediate mortgage payoff or lender approval.
How to Know If Your Mortgage Can Be Transferred
Step 1: Review Your Mortgage Documents
Look for the following clauses:
- Due-on-sale or alienation” clause
- Assumption clause– explicitly states if assumption is allowed
Tip: If you’re unsure, contact your lender or mortgage servicer directly.
Step 2: Confirm Loan Type
Check if you have an FHA, VA, or USDA loan, which are more likely to be assumable.
You can often find this information in:
- Your loan documents
- Monthly mortgage statements
- Your lender’s online portal
Step 3: Contact Your Lender
Ask:
“Is my loan assumable?”
“What is the process for transferring this mortgage to a family member?”
Will the due-on-sale clause be enforced in my situation?
Document all responses in writing.
Alternatives to Mortgage Transfer
If your mortgage can’t be transferred directly, consider these alternatives:
1. Refinancing
Have the family member apply for a new mortgage in their name and use it to pay off the existing one. You then transfer ownership via deed.
Benefits:
- Clean legal break
- No liability for original borrower
- Possibility of better terms
Drawbacks:
- Requires strong credit and income
- May involve high closing costs
2. Quitclaim or Warranty Deed (Without Mortgage Transfer)
You can legally transfer the ownership of the home using a quitclaim or warranty deed, but not the mortgage. You would still be liable for the loan unless the new owner refinances.
Risk: The alienation clause might be triggered, and the lender could demand immediate repayment.
3. Living Trust or Transfer-on-Death Deed
Use these tools to transfer ownership upon death without probate:
- Living Trust: Allows you to retain control while alive
- TOD Deed: Automatically passes the property to a named beneficiary
Both options avoid foreclosure triggers and provide clear estate planning routes.
Numerical Example: When Assumption Makes Sense
Imagine you have an FHA mortgage with:
- 3.0% interest
- $210,000 remaining balance
- 20 years left on the term
If your child assumes this loan, they’ll benefit from your low interest rate — which could save over $50,000 in interest compared to taking out a new mortgage at 6.5% today.
Comparison Table
| Option | Triggers Due-on-Sale Clause? | Lender Approval? | Best Use Case |
| FHA/VA Loan Assumption | No | Yes | Transfer to family member with low rate |
| Living Trust | No | No | Estate planning |
| Transfer-on-Death Deed | No | No | Inheritance |
| Quitclaim Without Refinancing | Yes | No (but risky) | Only with legal advice |
| Refinance in Family Member’s Name | Yes | Yes | Clean ownership & liability break |
FAQs
Can I transfer my mortgage to my child while I’m still alive?
Yes — but only if your loan is assumable or your child qualifies to refinance.
Can I avoid triggering the alienation clause?
Yes, by using legal exemptions (e.g., estate transfer, divorce, trusts) or ensuring lender approval.
Can a co-signer be added to an existing mortgage?
Generally not without refinancing. Most lenders require full requalification.
Actionable Steps
- Review your mortgage documents
- Contact your lender for clarification
- Explore assumption, refinancing, or trust strategies
- Work with an estate planner or attorney
- Evaluate long-term tax and financial implications
Final Thoughts
Transferring a mortgage to a family member involves more than passing down keys — it’s a nuanced process filled with legal and financial intricacies.
Whether your goal is to:
- Help a loved one become a homeowner
- Protect family assets through estate planning
- Manage ownership after a life event like death or divorce
You’ll need to strategize carefully and consult professionals to avoid unintended consequences like foreclosure or accelerated repayment.
