Can the buyer assume my mortgage?

Can the buyer assume my mortgage?

Can the buyer assume my mortgage?. Assuming a mortgage is when someone takes over someone else’s mortgage debt along with their home. The first thing is that a buyer makes a price offer, later the seller accepts the offer. The buyer then pays the seller’s equity and takes the liability for paying off the seller’s mortgage loan instead of paying in cash or mortgage finance. The difference between the offer price and the amount left to pay on the seller’s mortgage is called the seller’s equity. The buyer successfully becomes the borrower for the mortgage loan, which is an advantage.

The buyer gets all the seller’s repayment term, interest rate and mortgage conditions. If the note rate is lower than the prevailing market rate, the buyer will get a cheap loan. The seller can advertise a home with the benefits, which they can make it more interesting for buyers.

Nowadays, there are few sellers than can transfer their mortgages.

 

Here are the reasons why:

 

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• The “Non-Assumable” Clause

Unless the loan documents states that it isn’t, a mortgage is inherited. If a mortgage is assumable, a borrower may be able to transfer his mortgage to a less than stellar buyer. If the risk default increases, there is a chance the lender could lose the money they had on the loan. To protect their interests, the lenders make a “non-assumable” clause in their documents. You can’t transfer a mortgage to a buyer without having the consent of a lender if the mortgage has that kind of clause.

 

 

 

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• The “Due on Sale” Clause

If a mortgage doesn’t have a “non-assumable” clause in their document, they can still block the mortgage assumption through the back door. The clause of “due on sale” has the power to make the whole mortgage amount fall just as soon as the borrower transfer the property to someone else. If you do transfer the loan and the lender calls the debt, you have the right to pay up or you face serious legal and financial consequences. Almost all mortgages know contain this clause, which also includes the government-backed loans from the FHA and VA. The clause is said to be complex because they are optional. The lender has the choice of calling due the loan but it doesn’t have to force the early repayment. It is very unlikely that a bank will have this clause of the note rate is just a few points of the market rate. But if it rises rapidly, the lender has greater incentive to perform the clause.

 

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  Assuming a Mortgage With the Lender’s Consent

The seller can look for the lender’s permission to transfer the mortgage to a buyer. The buyer will most likely have to qualify for the loan. The lender must analyze the buyers credit report, the debt loan, the salary and expenses, and call to check their tax returns. They will also check the employees references and other important paperwork before the can decide whether the buyer can pay. A buyer that assume a FHA loan can find the qualification process easier than those that assume a conventional loan. Concealing a mortgage can transfer in violation of this clause and it might open you up to civil penalties. The original borrower stays liable for the whole loan repayments, unless the lender specified the release from the loan. If they don’t have a legal release, the seller can be called to make good the buyer’s default, and late payments and then the foreclosures will have to appear as blemishes on the seller’s credit report.

 

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