The rates for new mortgages may vary, whether by fluctuations in existing market rates as well a poor credit history can have a huge impact or one’s ability to acquire loans, so the thought of the low interest rates offered with an assumable mortgage loan attracts persons to this type of loan.

When this is completed, the borrower then assumes responsibility of the home sellers current mortgage at the preexisting rates which was offered to the seller at the inception of the loan. The assumable loan can be good or bad depending on the time of the loan, when looked at in terms of the fluctuations in interest rates, when the interest rates are high it would be better to seek out the assumable mortgage loans as they would naturally come with a low rate but in the instance where the interest rates are low, there would not really be a need for it.

There are many benefits to be derived from getting an assumable mortgage loan; the interest rate would not be subjected to fluctuations, a shorter period for repayment, savings can be derived from the lower rate, settlement costs you would normally pay on a new loan would not apply and both the seller and the buyer of the loan are able to share the savings to be derived from this type of loan.

The seller of the property can benefit in more than one way with this. In the case of a homeowner offering a mortgage which is more than the amount of the assumable loan, then a down payment would be required or another mortgage would have to be acquired to make up the amount. The seller of the property is then able to benefit from that transaction.

Another way for the seller to benefit is by receiving a higher price for their property. If you are not familiar with the process, it is best to seek the help of a professional when accessing a assumable mortgage loan.

A mortgage assumption is a contractual agreement wherein a home purchaser assumes the sum total of a seller’s requirements on his mortgage, including the full balance, the repayment of same, the length of the mortgage and the rate of interest. Such an assumption is not at all the same as purchasing a home subject to the mortgage. The approval of the current lender is always necessary when entering into a mortgage assumption. This is due to the fact that you are taking over the liability from the present homeowner.

One of the unique risks involved in an assumable mortgage can exist for the party that is selling the home. This type of loan can find the seller held liable for the loan even after the loan assumption has taken place. For instance, in a situation where the buyer to default on the mortgage loan, it could end up leaving the seller responsible for whatever amount the lender is not able to recover. To help minimize this risk, sellers have the option of releasing their liability in writing at the time of the agreement. Also, since the buyer is receiving great benefit from the mortgage assumption, he must understand that the seller should receive some advantage as well. In general, the advantage to the seller will materialize in a greater price for the house.

As interest rates trend higher, mortgage assumptions become more appealing. For example, if the best rate in the current market is 6% and you discover a home with a mortgage carrying 5%, the assumption of the latter would save a great deal of money. That is, obviously, should both the seller and the lender be amenable to the assumption. In the event of your assuming an existing mortgage, the present mortgagor will be released from liability and you will then be responsible for the prompt repayment of the loan and, should default occur, you would be named in any foreclosure suit.

Alternatively, should you purchase a home subject to a mortgage, the current borrower in not released from responsibility. In purchasing the home, you will take over the monthly payments and, we trust, make them in a timely fashion as stipulated. If the loan should ever go into arrears, the original borrower will be a party to any action or foreclosure. If you had bought the home subject to a mortgage, and the seller had the same arrangement when he purchased it, the very first borrower, at the beginning of the line, would remain liable.

Does someone assuming your mortgage release you from all liability?

My husband's ex wife is trying to assume the mortgage instead of re-financing like she is supposed to. If she is allowed to do this, will he be released from all liability even if she gets foreclosed on? His VA entitlement is also in the house, and to my understanding unless she re-finances, he will not get that entitlement back since she is not a veteran. Is this correct?