If my father and I are interested in switching houses and mortgages, how do we go about this?

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If my father and I are interested in switching houses and mortgages, how do we go about this?

Is this legal? My father’s house is bigger and his mortgage is bigger as well. He has an variable rate mortgage my mortgage is fixed.

Asked on June 15, 2011 under Real Estate Law, New Jersey

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

If you're serious about doing this, it's worth speaking with a real estate attorney, but I strongly suspect you will *not* be able to do this:

1) First and foremost, mortgages are generally not assignable by the borrower--while you can check the terms and conditions of the mortgages in questions, it's usually the case that the borrower may *not* transfer the mortgage to another person (they are set up this way to prevent a credit-worthy person from taking one out, then transfering it to a non-credit-worthy person). If this is the case, then right at the outset, you will not be able to do this unless the bank agrees--and there's no reason for it to to agree. Banks would prefer you pay off the mortgages and take out new ones, so they can do new underwriting and credit checks and collect new fees.

2) There are tax consequences to be considered, too, when exchanging assets with different values, that would need to be taken into account--and which may not be favorable for both of you.

Probably the better way to do this is to sell the houses to each other, in a private sale, without a broker, at favorable prices, and timed so you can each pay off your mortgage and replace it with a new one during the transaction; a real estate attorney can guide in you exploring how you'd set this up.


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