Do banks do mortgage assignments?
I have been told if a property has an existing mortgage on it and one wants to buy that property one can get a bank to do what’s known as a mortgage assignment so that one can avoid all or at least part of the mortgage tax. Does anyone know of any banks that actually…
I have been told if a property has an existing mortgage on it and one wants to buy that property one can get a bank to do what’s known as a mortgage assignment so that one can avoid all or at least part of the mortgage tax. Does anyone know of any banks that actually do this. I made a few phone calls and while it seems that some banks will do this when refinancing on a property that you already own, most will not do it if you are purchasing the property. I don’t understand why that would be. Does anyone know of banks that will do this when purchasing a property? For banks that don’t do it, does anyone know what the rationale behind not doing it is? Is it some legal issue or do banks just not feel like doing it?
OP here, anon 10:45 – what is a GNMA loan?
Also can you explain further why the due on sale clause would make it impossible to do the assignment since that lender will get their balance at the sale of the property? (I am not a lawyer so maybe this would make more sense if i were).
Here is the real answer:
1) Banks do not let you assume someone else’s mortgage or assign the mortgage UNLESS it is a GNMA loan; most other mortgages have a ‘due on sale’ clause in them. This makes analyzing the mortgage backed securities easier.
2) If you refinance
a) if you do it with the same bank it is usually handled as an amendement to the existing mortgage (no tax due); otherwise it is a new mortgage but you only pay taxes on the difference between the new mortage and old mortgage amounts.
OP Here:
anon 8:50 – something is only tax evasion if its illegal, as long as this is legal how is it tax evasion? Especially since someone already paid a tax on the original mortgage. Remember this scenario would only work if there was an existing mortgage on the property. If there is no mortgage you would have to pay the tax.
anon 9:47 – uh i think that’s my point. Assuming doing this is legal (which from my limited knowledge of the law it seems like it is) why wouldn’t a bank want to do it? It would make that bank much more competitive with other banks since the borrower wouldn’t need as much cash for the closing?
I think all banks must do an assignment when you re-finance, especially in NYC. Otherwise, paying the mortgage tax again would make any re-finance extraordinarily expensive. We definitely didn’t pay the mortgage tax when we re-financed and I don’t think the bank lawyer was paid anything extra.
I can’t imagine it is possible to do an “assignment” for the original purchase of a property to avoid mortgage tax. Otherwise, I’d think too many people would take advantage, since we’re talking tens of thousands of dollars in tax savings.
3:17 here. Sorry, I didnt understand what you meant.
Why would a bank do that so you can avoid the mortgage tax? Wouldn’t that be tax evasion?
OP here – anon 3:17, i think you are thinking of assumption of a mortgage which is different from an assignment. Assignment is different in that the bank you take out a loan with essentially buys the sellers mortgage pays out whatever money is owed to the seller’s bank and pays the seller the differance. This is as opposed to a regular sale where technically the seller is receiving the money and is paying back his own bank. Assumption is what you are thinking of where you take over the existing loan and obviously a lender wouldn’t go for that. But with an assignment you still have your own mortgage (and hence go thru a normal underwriting and approval) with the lender.
You can usually do an assignment of mortgage when you refinance your existing loan. The bank attorney usually takes a higher fee for his work.(ask) and you can usually do a update of title to save money on a new title policy.
I dont know if they will or wont but I can think of a reason why they wouldn’t.
Most banks package out home loans together according to risk profile and then sell them as a financial instrument for a price. If they allowed you to transfer the mortgage from one person to another, the risk profile would change. (since its your reliability of paying that $ back that creates the risk). Therefore it would be impossible for them to package it up if you could transfer it.