There are a lot of mortgage terms, many of which people don't understand, one of the most common is “assuming a mortgage.” This term has been around for many years and it comes with many advantages and disadvantages to both home buyers, and sellers alike.
What Is Mortgage Assumption?
Mortgage assumption is a financing agreement that enables an individual selling their home to transfer their mortgage balance, rate, and terms to the buyer. More or less, the buyer would be assuming the sellers mortgage so there would not be a need for the buyer to apply for their own mortgage loan.
Why consider Mortgage Assumption?
If you’re shopping the housing market but you’re experiencing difficulties getting a good interest rate or financial approval, then you may want to consider assuming a mortgage. Additionally, for buyers there are some advantages such as securing a lower interest rate, eliminating closing costs, and eliminating new loan fees as during a mortgage assumption these fees are usually waived. However, for the seller this can be a huge disadvantage should the buyer fail to make their monthly payments.
Can I Apply to Assume a Mortgage?
If you are a potential buyer than Yes! However, the qualifying decision is ultimately left up to the bank or lender administering the mortgage transfer. As with any mortgage, when you’re being qualified your credit and income will be examined.
One very important consideration in making the decision to assume a mortgage is the term left on the original mortgage. You want to ensure that there is enough time left for you to pay back the remaining balance. Speak to your mortgage agent to learn more about additional fees that can also be added, such as mortgage insurance premiums.
There are a number of different financial options out there for buyers, but finding the right mortgage solution can present its own challenges without an experienced financial expert helping you along the way. Call me to explain all the options available to you based on your personal financial situation.
Meghan Van Houten - Mortgage Agent
416-709-9062 | 1-877-366-3487
Independently owned and operated
202-120 Traders Blvd. E., Mississauga ON L4Z 2H7