Assumed mortgage
Encyclopedia
In real estate
an assumed mortgage
occurs when a the buyer of a real property
is transferred all the obligations of the seller's mortgage.
The buyer assumes all the obligations under the mortgage, just as if the loan had been made to the buyer. The major driving force behind assumptions is the lower interest rate on the assumed mortgage relative to current market rates. This method is frequently used when the buyer can not get a better interest rate than the seller currently has.
When a homeowner sells their house they will ask for the equity they have obtained (Sale Price - Amount Owed). Under an assumed mortgage, they will also transfer any obligations to a bank, on to the buyer. In the event of a default, the bank (as a creditor beneficiary) has the right to assert their interests against both contracting parties.
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
an assumed mortgage
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
occurs when a the buyer of a real property
Real property
In English Common Law, real property, real estate, realty, or immovable property is any subset of land that has been legally defined and the improvements to it made by human efforts: any buildings, machinery, wells, dams, ponds, mines, canals, roads, various property rights, and so forth...
is transferred all the obligations of the seller's mortgage.
The buyer assumes all the obligations under the mortgage, just as if the loan had been made to the buyer. The major driving force behind assumptions is the lower interest rate on the assumed mortgage relative to current market rates. This method is frequently used when the buyer can not get a better interest rate than the seller currently has.
When a homeowner sells their house they will ask for the equity they have obtained (Sale Price - Amount Owed). Under an assumed mortgage, they will also transfer any obligations to a bank, on to the buyer. In the event of a default, the bank (as a creditor beneficiary) has the right to assert their interests against both contracting parties.