What is assumable mortgage?
An assumable mortgage is a sort of financing arrangement in which an outstanding mortgage and its terms can be assigned from the current owner to a possible buyer. By assuming the previous owner’s remaining debt, the buyer can avoid having to obtain the person’s mortgage. Many homeowners usually take out a mortgage from a lending company to finance the purchase of a residence or business. The contractual arrangement for returning the property loan involves the interest rate which the borrower must pay monthly in addition to the principal repayments to the bank. If the homeowner chooses to sell his home possibly in the future, he/she might be able also to transfer the mortgage to the homebuyer. In this situation, the primary mortgage taken out is an assumable mortgage.
An assumable mortgage provides a future buyer to consider the home seller’s mortgage – current primary balance, interest rate, repayment term, and any other contractual terms of the mortgage. Preferably than going through the strict process of obtaining a home loan from the bank, a buyer can take over a current mortgage which could be a cost-saving option depending on the interest rate situation.