I have had a number of calls about assuming a mortgage so here is some good information.
Assumption of mortgage is the purchase of mortgaged property whereby the buyer accepts liability for an existing debt secured by a mortgage on the property. This generally requires the consent of the lender that owns or services the existing loan. The seller remains liable to the existing mortgage lender (whether the lender is a commercial bank, thrift, credit union, mortgage banker, or private lender) unless the lender agrees to release the seller from further liability.
For example, a homeowner owes a 30-year mortgage loan of $250,000 against his house. A prospective buyer wants to purchase the house for $300,000 and keep the same mortgage in order to avoid going through the process and expense of applying for a new loan. The buyer pays $50,000 cash for the equity and assumes the $250,000 mortgage, becoming liable for the debt. However, the original owner remains liable as well unless and until the lender releases the original borrower.
A transfer of property with an existing mortgage loan that is made without the lender's consent is sometimes referred to as a sale "subject to" the existing loan. This type of transfer does not avoid the lender's right to call the loan due under the due-on-sale provision in the loan. It also does not relieve the seller of liability on the existing loan.
In the United States, most mortgages in recent years restrict assumptions of existing mortgage loans when the mortgaged property is sold by including a due-on-sale clause. This type of provision permits the lender to require payment of the full loan balance if the property is transferred to a new owner without the lender's consent. WIXS&RBailiff
I have had a number of calls about assuming a mortgage so here is some good information.
Assumption of mortgage is the purchase of mortgaged property whereby the buyer accepts liability for an existing debt secured by a mortgage on the property. This generally requires the consent of the lender that owns or services the existing loan. The seller remains liable to the existing mortgage lender (whether the lender is a commercial bank, thrift, credit union, mortgage banker, or private lender) unless the lender agrees to release the seller from further liability.
For example, a homeowner owes a 30-year mortgage loan of $250,000 against his house. A prospective buyer wants to purchase the house for $300,000 and keep the same mortgage in order to avoid going through the process and expense of applying for a new loan. The buyer pays $50,000 cash for the equity and assumes the $250,000 mortgage, becoming liable for the debt. However, the original owner remains liable as well unless and until the lender releases the original borrower.
A transfer of property with an existing mortgage loan that is made without the lender's consent is sometimes referred to as a sale "subject to" the existing loan. This type of transfer does not avoid the lender's right to call the loan due under the due-on-sale provision in the loan. It also does not relieve the seller of liability on the existing loan.
In the United States, most mortgages in recent years restrict assumptions of existing mortgage loans when the mortgaged property is sold by including a due-on-sale clause. This type of provision permits the lender to require payment of the full loan balance if the property is transferred to a new owner without the lender's consent. WIXS&RBailiff