Any delinquencies or defaults incurred by the buyer will also appear on the credit report of the the seller. Although the buyer agrees to make payments on the home loan during a simple assumption, the seller still remains responsible for the mortgage. A simple assumption places the seller in the position of a secondary obligee, similar to a mortgage co-signer. This process is inherently risky for the seller, as they remain liable for payments on the original debt. This is a private transaction where title to the home passes from the seller to the buyer, and requires less involvement from the lender. There are generally two types of mortgage loan assumptions:Ī Simple Assumption is where the buyer takes over on the mortgage payments from the seller. Similar to a standard purchase mortgage, whether your assumption is approved will depend on your ability to qualify for the loan and your ability to repay your debts. Not all loans are assumable, however, and the lender must approve the assumption in most cases. The buyer agrees to make all subsequent loan payments going forward, as if they took out the original loan. The rights and obligations of the original loan are essentially ported from one borrower to another without a new mortgage being created. When Does it Make Sense to Transfer a Mortgage?Īn assumable mortgage allows another party to take over the remaining payments on a mortgage loan, while keeping the existing loan rate, repayment period, principal balance and other terms intact.For buyers and sellers in a rising interest rate environment, taking advantage of an assumable mortgage is a great option that makes financial sense-if done properly. An assumable mortgage is a loan that can be transferred from one party to another with the initial terms remaining in place.
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