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Simple English definitions for legal terms
assumable mortgage
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A quick definition of assumable mortgage:
Assumable mortgage: A type of mortgage that can be transferred from the seller to the buyer when a property is sold. This means that the buyer takes over the existing mortgage instead of getting a new one. It can save the buyer money on fees and interest if the mortgage has a lower interest rate than the market. However, the transfer can only happen if the mortgage is assumable, the creditors agree to the transfer, and the buyer meets the financial requirements. Sellers need to be careful because they may still be responsible for the mortgage even after the sale, unless the creditors release them. Buyers should also consider if it's worth getting their own mortgage to cover the rest of the purchase price.
A more thorough explanation:
An assumable mortgage is a type of mortgage that can be transferred from the seller to the buyer when a property is sold. Instead of the buyer getting a new mortgage, they take over the existing mortgage. This can save the buyer money on fees and interest if the mortgage has a lower interest rate than the current market rate.
However, not all mortgages are assumable, and the transfer can only happen if the creditors agree to it and the buyer meets the financial requirements of the mortgage. The seller may still be liable for the mortgage even after the sale, unless the creditors release them from it.
For example, if John sells his house to Jane for $200,000 and the existing mortgage is $150,000, Jane can take over the mortgage instead of getting a new one. However, if the mortgage is not assumable, Jane will have to get a new mortgage for the full purchase price.
It's important for both the buyer and seller to carefully consider the benefits and risks of an assumable mortgage before agreeing to it.