Understanding Relocation Assistance through Mortgage Options
This article explains how relocation mortgages facilitate employee transfers by providing loans to cover property purchase and existing mortgage finalization. It discusses how companies assist employees financially during relocations, easing the burden of moving and ensuring smooth transitions for both parties. The piece covers the process of bridging loans, valuation, and sale timelines, highlighting the mutual benefits of employer-supported relocation assistance in today's flexible work environment.
Many companies include in their employment offers that job locations may change based on company needs. This clause is mainly a safeguard, as most organizations prefer not to relocate employees unless absolutely necessary. For employees, relocations can be stressful, costly, and time-consuming, leading them to prefer minimal moves.
When companies need to transfer existing staff or hire new employees to different locations, they often face resistance due to the challenges of relocation. To ease this process, employers provide various financial incentives, including relocation bonuses, salary increases, or specialized loans called relocation mortgages. Let's explore what a relocation mortgage entails.
A relocation mortgage is a loan offered by the employer to help employees purchase a new home at the new location, without needing to sell their current property first. The fund typically covers the existing mortgage, facilitating the transition. For example, if an employee owns a house at Location A and is transferred to Location B, the mortgage loan can help settle the old home’s loan while enabling them to buy a new property.
As the current house may still be under mortgage, the employee might require a bridging loan to finance the new property until the old one is sold. Banks evaluate property values, sales timelines, and interest rates to determine loan details. Once the old home sells, the proceeds are used to pay off the bridging loan. Any excess can reduce the new mortgage balance.
Managing two loans at once can be overwhelming, especially when the employee incurs increased expenses in a new city. To prevent this burden, companies often cover the costs of the relocation loan, encouraging employees to accept transfers. This arrangement benefits both sides: employees move smoothly, and employers retain valuable staff.
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