Financing transfers to family members is a situation that can arise for a variety of reasons.
And when they do it’s important, as a broker, to know how to handle each situation.
Regardless of whether the transfer is from a parent to a child, due to a marital separation, or any reason in between, each situation will need to be classified accordingly in order to be completed.
Generally, family transfers will fall into these two scenarios:
- A transfer between family members where there is a mortgage on title
- A transfer to a family member where the transferee needs a new mortgage to complete the arrangement.
In general, if the borrowers are transferring a title between family members where there is a mortgage on title, the lender will need to consent. Technically, if this is done without lender consent, it may be a default under the mortgage. And this is absolutely something that you and your borrowers are going to want to avoid.
You should also expect in this scenario that the lender is going to ask for some additional information. They are going to want to know about the people going on the title and those coming off. They may also want to make sure property taxes and fire insurance are up to date and current.
For transfers to a family member needing a mortgage, these are treated as simple purchase mortgages. The usual application, underwriting, and due diligence will apply.
It should also be noted when financing transfers to family members that mortgage law is province specific. This means that lenders may have different requirements for these transfers depending on your province.
MIC’s and alternative lenders often provide good options for financing family transfers. Especially where one or more of the parties don’t qualify for conventional financing. Talk to your lender and be sure to fill them in with all the details with what the borrower has in store.