I can’t quite wrap my head around this so anything will be appreciated.
So if a company ‘buys’ a property for me with the expectation of me paying it back, when I switch mortgage companies, does the new company pay off the debt to the old company? How does it transfer over?
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Yes, the new company pays off the debt to the old company. A couple of things happen at the same time. The old company releases their lien (their ability to take your house if you don’t pay the loan) and the new company gets a lien established. The new company would usually want assurances that the house will still *exist* for them to take it in case you stop making payments – for example they’d do an inspection/appraisal and they’d need proof that you have insurance, and they would often make arrangements to handle the insurance so you can’t stop paying *that*. Basically all the same details you had to work out when you bought the home in the first place.
For this reason it is typically expensive and requires sitting down with a lawyer and representative from the bank(s), just like purchasing a new house, rather than being a quick process like applying for a credit card online.
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