Apr 03 2011

What is an assumable mortgage?

Category: Real Estate

Answer:

Assumable MortgageAn assumable mortgage is an alternative to the traditional bank mortgage process. It essentially gives the home buyer the ability to take over the current mortgage of the home seller, as long as the bank (that approved the loan) agrees. The assumable mortgage is advantageous to the potential buyer if interest rates have increased since the loan was initially issued. It is advantageous to the seller because they can usually recover their equity, and at the same time, be relieved of their loan responsibility. You will rarely see an assumable mortgage in today’s marketplace (2010 and beyond). Most current conventional loans must be repaid immediately after the sale of the property, and most banks will only allow a mortgage assumption at the current market interest rate. Today, only a few FHA (Federal Housing Administration) and VA (Department of Veterans Affairs) loans are able to be assumed but, in those cases, the buyer must be approved by the bank or lender.


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