What happens to a fixed rate mortgage when one sells?

Real Estate
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I am looking to buy a property and the seller has a fixed mortgage on it until 2028, at 1.4%, which nowadays would be a good deal. I know the mortgage should either be passed on to me or cancelled. The seller wants to know nothing about these details so they’ll use an accountant to make all these choices, but I might have an influence (if there’s a choice at all, that is).

So I was wondering: would it make any sense if I call up the bank of the seller and ask if they would ever be interested in me taking over the mortgage? Most likely the wouldn’t, given today’s higher rates, right? I not only would be interested in a low-ish fixed interest rate for me, but I would also like to avoid the seller having to pay the likely high fee for cancelling the fixed mortgage (at least all the unpaid interests, I guess).

What do you guys think?

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Given that today’s interest rates are higher the seller should be able to exit this mortgage without paying anything extra (if you breach a fixed mortgage early you normally have to compensate the lender for the lost profit, not the total nominal interest).

I would assume for the same reason that the current lender has no interest in transferring that mortgage to you, unless you would be a new, valued customer (eg committing to transferring all your business to them or similar),

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There are 3 options with a fixed rate mortgage when you sell a property:

  1. You transfer the mortgage to another property of yours (or to the next you are in the process of buying). You replace it with a Saron in the meantime till the property is really sold.

  2. Buyer takes over the existing fixed-rate mortgage with same amount, interest rate and duration. He adds a 2nd mortgage if necessary (usually the case) with new conditions from the existing bank.

  3. Mortgage gets cancelled with selling and the previous owner has either to pay a penalty or even gets money back from the bank. Depending if the refinancing rate of the mortgage + some internal costs are higher/lower than the current ones.

I had a client last year that cancelled a 10-year mortgage which still had 8.5 years left. He got a 5-figure amount from the bank because it had an interest rate of around 1% and current marlet rates were around 3%.

In your case seller will probably be interested in option 2 and 3. Either you take over the mortgage and he‘ll demand a higher selling price (if he isn‘t a fool) or he cancels the mortgage and gets some money back.

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You mean the client received money from the bank for the 2% interest rate difference calculated over those 8.5 remaining years? Sounds too good to be true, that’s why I ask :wink:

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5

Just the difference in refinancing costs, but essentially yes.

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This is exactly what is normally stated in a contract. It is just an uncommon situation for last 20(?) years, that’s why people don’t realize it.

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Interesting. My takes from this discussion:

  1. Another example how there is an equilibrium in the financial system. In this situation you can get a new mortgage with a higher rates or you can get over the existing cheaper mortgage, but you will have to pay more for the apartment. If you push both options long enough, I guess that in the end one should come to the same costs. The difference in fees should be decisive.

  2. Mortgage with a low rate has some positive additional value if rates are going much higher, and this value can be realized. Of course there is also an additional negative value if rates go down, but in this case usually it is just like this and there is nothing you can or should do. Makes sense, as taking a mortgage is equivalent to selling a bond in some way.

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This. Interest rates mostly went only in one direction in the last 30 years. So people aren‘t used to the current situation.

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