Think Twice Before You Take Over Mortgage
It feels really good when you finally find your dream home. It feels
even better when this home comes with a mortgage with the lowest
interest rate on earth. Sounds like a great idea to take over
mortgage payments already existing on a property. It’s a little
known fact that one of your options is to assume the mortgage on the
house you are buying. “Assuming” is another way of saying that you
are taking over the existing mortgage on the house, rather than
getting a new one. Potential savings exist if the interest rate on
the existing mortgage is lower than what’s available in the market.
Don’t Assume Too Much
An assumable mortgage is a mortgage loan that allows the home
buyer to take over the seller’s mortgage when purchasing a home.
When you assume a mortgage, you take over both its interest rate and
monthly payment schedule. Before taking over mortgages, you still
need to qualify for the loan. You have to pay closing fees as well.
The buyer assumes all the obligations under the mortgage.
However most mortgage loans are not assumable from a lender’s point
of view. Generally, lenders have clauses in their mortgage notes
that won’t allow assumption. According to these clauses, if the
property is sold, the loan must be repaid. An exception is FHA and
VA loans which do not contain these clauses.
Usually the main motivation behind taking over mortgages is a
lower interest rate. But buyers should not expect to receive the
full value of an assumption. The parties share the savings in one
way or another. A higher selling price may be the seller’s benefit.
If you seriously consider taking over payments of an existing
mortgage loan, try to see if the benefits outweigh the potential
issues. Now with so many great mortgage loan options online, you can
probably get lower interest rates. Compare the terms of the existing
mortgage with what’s available in the market. Lenders in this web
site may have better rates for you.
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