Looking For A House With An Assumable Mortgage?

An assumable mortgage is a mortgage that allows a subsequent buyer the ability to take over the payments on a home instead of getting new financing. There are some good reasons to assume a mortgage if you find a house with assumable financing. If the existing mortgage has a lower interest rate than current market rates then buying a house and selling a house can become much easier! You might find yourself interested in a house primarily as a result of the lower interest rate, although closing costs are frequently much lower as well.

Assumable mortgages are not as common as they were when mortgage interest rates were in the double digits. I know a woman whose home had an assumable loan at twelve percent (12%) interest and she sold it immediately from a small newspaper ad in 1980 when current market interest rates had reached eighteen percent (18%). Her assumable mortgage with a low interest rate made her home very attractive. That twelve percent (12%) interest rate would not be as attractive today, however.

Most lenders make certain to include due-on-sale clauses in their mortgages, meaning that the entire loan amount must be paid when the house is transferred to the new owner and mortgage assumption is not possible. A buyer has to pay cash or get a new mortgage loan.

Mortgage loans guaranteed by FHA or VA are assumable by qualifying buyers. Those agencies require that the buyer is approved by the lender or the guaranteeing agency, and the process is similar to applying for a new mortgage. Upon approval of the buyer and sale of the property, the seller is relieved of all liability on the mortgage note. This is a very important step for the seller, and one to keep in mind if you buy a home or a property with an assumable FHA or VA mortgage because you may sell it yourself someday.

Before you purchase a house with an assumable mortgage, be sure you thoroughly read or have your attorney read the mortgage documents to make certain it does not have a due-on-sale clause attached to the loan. Also, when you are selling a house with an assumable mortgage, make sure that the lender completely removes you from the mortgage note once the transaction is closed so that you no longer have any responsibility or liability on the mortgage loan.


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