Benefits of Assuming a Mortgage
A type of loan that you can transfer to some other party which will make them responsible for paying the remaining mortgage installments is known as an assumable mortgage. The existing mortgage can be transferred from one party to another by the help of a service lender.
There are 2 different types of mortgage assumptions. If the seller transfers the mortgage to the buyer without the approval of the lender, then this is called a simple assumption. In this type of mortgage assumption until the mortgage is fully paid, the seller has complete responsibility. The property is foreclosed if the buyer does not pay the monthly installments and the seller of the property will be held responsible. The type of mortgage assumption in which the buyer of the property receives a letter of approval from the service lender is known as an assumption by novation. In this type of mortgage assumption, the seller is relieved from all responsibilities of the mortgage. There are only certain types of mortgages that can be assumed. There are many advantages of assuming a mortgage. Low costs and interest rates can prove to be very appealing for a buyer.
Usually the fees are lesser than the cost of acquiring a new mortgage and it does not require any estimations. This can also terminate any type of repair requirements. Because of the interest rate the buyer keeps the present mortgage lien on the real estate, rather that acquiring a new mortgage. But if the rate of interest on the present loan is lower than what the buyer could acquire, assuming the preset mortgage could prove to be a better financial decision.