What Is a Mortgage Assumption in Real Estate?
A mortgage assumption is a transaction that takes place when a new home buyer formally takes over the loan obligation of a seller while that seller’s mortgage financing stays in place. Through mortgage assumption, another person “assumes” your loan at its current interest rate and takes over the payments. In some cases the seller will be released from the loan, though in most cases the lender will refuse to release the original borrower (the seller) from the original loan obligation even in cases where the buyer is well-qualified for the mortgage assumption. Which loans are assumable? Very few loans are assumable these days, however it cannot hurt to review your mortgage to see if it is assumable. There are two basic types of mortgage assumption transactions: a simple assumption and a novation agreement. In a simple assumption the mortgage lender is not involved and the buyer and seller come to a private agreement. In a novation agreement the seller will notify the lender of their inte
