Whether you are selling your home or looking to purchase, an assumable mortgage may benefit you. The basic premise behind an assumable mortgage is that the buyer of a home is able to take over the mortgage that the seller currently possesses. It may be possible for you to take advantage of an assumed mortgage, considering the following points.
Only certain types of mortgages can be assumed
If the mortgage in question has a fixed rate, there is a high chance that the mortgage can be ‘assumed’ by the new homeowner. To find out for sure if this is the case for the mortgage, the lender will have to be contacted. Typically, variable-rate mortgages and home equity loans are not assumable.
The lender can be involved with the transferring of the mortgage in several ways
First of all, the lender will likely have to approve of the buyer taking over the mortgage. If they are approved, the mortgage terms and the remainder of the mortgage payments will then become the legal responsibility of the buyer.
Depending also on the lender, the seller of the property could remain liable for the mortgage even after the transfer is approved. This means that if the buyer defaults on their loan in the future, the previous owner of the house will have some responsibility still. However, it is possible for a lender to remove the seller of the home from all liability, as long as the buyer meets certain standards.
Buyers can benefit if interest rates have risen
If the mortgage was first taken out when interest rates were lower than they are now, an assumable mortgage can make a financial difference for the buyer–they will take over the mortgage as it is, interest rate and all. Do keep in mind, though, the buyer may be charged a fee by the lender so they can make the arrangements to have the mortgage assumed.
Buyers may be able to apply for a larger loan, if necessary
Borrowing more money than is included in the current loan may be possible, as well, through the lender of the assumable mortgage.
Contact Rakhi Madan Mortgage Broker to learn more about your mortgage options, whatever your situation.
