Has your mortgage ever been sold?
Many times people are confused when their home loan is sold to another lender. They feel it is a reflection on them or
The reality is that mortgages are bought and sold all the time and it typically has nothing to do with the borrower. Banks and lenders sell their closed mortgages to free up capital to do more loans. Lenders can only fund so many loans before they no longer have any money left to loan. That’s where the secondary markets come in to play. Secondary market is just the term for the place that mortgages are bought and sold after they are already closed. When a lender funds a loan and then sells it, they make a small profit depending on the terms of the loan and they have all their capital replenished so they are able to move on to another home loan.
The reason is a good thing:
It may not seem like it, but this system benefits borrowers by increasing competition in the mortgage market. If they weren’t able to sell their loans, some lenders would only be able to lend so much and then wait for a borrower to pay off their loan before they could lend again. This would decrease the amount of lenders available and therefore, decrease the competition in the marketplace.
The good news for consumers is that the terms of a loan can never change when it is sold. The loan terms are set in stone at the time of closing and protected by law. So the next time your mortgage is sold, don’t be alarmed or concerned, the lender that you were with simply wanted to free up some money to lend to someone else.
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