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Simple English definitions for legal terms
assumption fee
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A quick definition of assumption fee:
Assumption fee: This is a fee charged by a lender when someone buys a property that already has a mortgage on it. The fee covers the cost of processing the paperwork needed for the new buyer to take over the existing mortgage. It's like a fee for the lender's time and effort to make sure everything is in order for the new buyer to assume the mortgage.
A more thorough explanation:
An assumption fee is a charge imposed by a lender for processing records when a new buyer takes over an existing mortgage. This fee is usually paid by the buyer and is meant to cover the costs associated with transferring the mortgage to the new owner.
Let's say you're buying a house from someone who still has a mortgage on it. Instead of taking out a new mortgage, you decide to assume the seller's existing mortgage. In this case, the lender may charge you an assumption fee to cover the costs of processing the paperwork and transferring the mortgage to your name.
For example, if the assumption fee is $500, you would need to pay this fee in addition to any other closing costs associated with the purchase of the home.
Another example would be if a homeowner wants to transfer their mortgage to a family member or friend. The lender may charge an assumption fee to process the transfer of the mortgage to the new owner.
These examples illustrate how an assumption fee is a charge imposed by a lender for processing records when a new buyer takes over an existing mortgage.