“An assumable mortgage is held by the seller and can be taken over by the buyer when a home is sold,” explains Eisenberg. “Such loans are hard to find because most lenders stopped voluntarily writing them many years ago.”
Most new assumable loans today are adjustable rate mortgages. They may be attractive if the interest rate on the existing loan is lower than the rate the buyer could otherwise get on a new mortgage, either because of current market conditions or the buyer’s poor credit history.
“To determine whether to assume an old loan or apply for a new one, pay close attention to the possible assumption fee, usually one point, and other terms of assumption set forth in the existing loan,” says Eisenberg.
One plus: there are generally few closing costs with an assumable loan.
“While an assumable mortgage can speed up the property sale, sellers should be careful about letting a buyer assume their mortgage,” warns Eisenberg. Depending on the state and terms of the mortgage, a seller may remain liable for the loan until it is paid off in full, meaning the lender may go after both the seller and the buyer if the loan is not paid.
For more information on loans and mortgages, please contact Louis Eisenberg, Associate Broker, Realtor, Prudential Towne Realty, 109 E. Main Street, Norfolk, VA 23505, leisenberg@prudentialtownerealty.com, 757-572-7244, or www.LouisEisenberg.com
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