What Does it Mean When Your “Mortgage is Sold”?
You have purchased your home, moved all your furniture in, and began building your life in your new home. Then a letter arrives in the mail saying your loan has been sold. What does this mean? How will it impact your mortgage?
There is no need to panic; a sold loan simply means the lender has sold the rights to service your mortgage. The new company will now be collecting the monthly principal, interest, property taxes, and insurance payments.
How are homeowners affected by a mortgage sale?
Homeowners experience only a slight impact when a lender sells their loan. The monthly payment will remain the same each month, and the loan will continue to have the same repayment length.
Unless, of course, you have an adjustable-rate mortgage. An adjustable-rate mortgage loan allows the interest rate to fluctuate up or down, changing your payment amount. Your interest rate could change because of the sale of your mortgage, but that could happen with your original lender as well.
Why is the lender selling your loan?
It is very common for mortgage loans to be sold to a new lender. There are two explanations to answer this question:
- Your mortgage lender simply does not have enough cash to provide everyone with a loan at the same time. A mortgage is a loan with a term of 15-30 years, so lenders make back their money slowly. So, most lenders cannot accumulate cash fast enough via servicing to make new loans. On the other hand, banks have a higher amount of capital on hand and can create new loans while collecting servicing on their existing loans.
- Loans = Profit. Lenders and banks generate profit when selling a loan. Investors who purchase these approved loans from banks are willing to buy due to the steady amount and interest accumulated on the loan.
Now that your loan is with a new company don’t forget to set up your automatic payments. Having your monthly balance automatically sent to your mortgage company will help you avoid costly fees and keep your loan in good status.
Contact your lender for any questions about your loan!
At Primary Residential Mortgage, Inc. – Wooster, we are passionate about partnering with clients to guide them through their home buying journey. Whether you are purchasing your first house or you’re a seasoned buyer, PRMI – Wooster can answer any questions you might have and make the mortgage process as hassle-free as possible.
PRMI – Wooster has been helping clients purchase homes since 1998 and is backed by one of the most established mortgage lenders in the county with a nationwide presence. We offer a variety of loan programs for the greater Wooster, Ohio area – including Canton and Medina, Ohio. Are you looking for a trusted lender? Contact us by phone at 866.888.7902 or email Matt Shanlian at mshanlian@primeres.com.
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