Mortgage Question - Assumable Mortgage

[Fobulous]

Hello All,

Just had a quick question for the group.

I have contacted my mortgage company as we are looking to sell our home. They have mentioned that we can in fact sell our home and the buyer is able to assume our mortgage without penalty.

They also mentioned that we as the seller and the current mortgage holder are liable if the buyers do not pay a mortgage payment. We would be liable for the life of the mortgage (meaning until they either refinance or close out the mortgage).

Does anyone on hear have any experience with this? Is there any way out of this but still allowing the buyer to assume the mortgage.

Can anyone refer me to a good real-estate lawyer?

Thanks in advance!

-FoB.

[Slava]

For the real estate lawyer contact troutman.

I thought that the liability was only for a year or two, but I could be making that up! I think that liability is part of the package though, and that provision is why you're allowed to sell your home this way?

[troutman]

PM sent - I would generally advise vendors not to offer assumable mortgages. Vendors are potentially on the hook if the buyers default (in this economy, the risk is greater). Rates are already low, so buyers can get their own good rates. If they can't qualify for their own mortgage, that should be a red flag to the vendor.

Not all lenders allow assumable mortages.

[Burninator]

When I got my mortgage my lawyer told me it was assumable and that if I allowed someone to assume it I would be liable for one year and then after that it would fully transfer to them. I'm sure this varies from mortgage to mortgage.

The lawyer also said that it would be colossally stupid (not her actual words, she advised strongly against it) to allow someone to assume your mortgage. If they missed the last payment on the mortgage the bank could come after you for the full amount. She said that they have had to deal with banks doing this multiple times.

[Fobulous]

Thanks for the heads up!

After reading what you all have mentioned I am going to definitely stay away from the assumable option. My lender has told me that I am able to allow the buyer to assume but I don't think it will be worth the risk.

Thanks again CP!

[Mike Oxlong]

Everyone pretty much gave you all the info you need.
Your lender will make them qualify to assume that mortgage, if they can qualify to assume yours chances are they can qualify for a new mortgage.

That is a better scenario for everyone as they will get today's low rates, and you won't be on the hook for any missed payments.

Tell them to call me if they need a mortgage!

[ken0042]

When I bought my house 5 years ago I assumed the mortgage. I think times have changed due to some of the reasons outlined above, but the advantages at the time were:

- Seller doesn't face a penalty for closing the mortgage early. Most times you can negotiate that with your bank/broker; but in my case the house I bought was being sold due to divorce.

- Seller being on the hook for a year was a good thing. I bought my house for under $200K and within a year it was worth $240K. 11 months later the seller asked one of my neighbours how I was doing- he wanted me to default

- Assumable does open it to more buyers. One example I know of is friends buying a place to rent it out; so they could over extend themselves and hope the place doesn't sit vacant for too long.

[Winsor_Pilates]

Another vote for staying away from the assumable mortgage route. They may become more popular again when rates go up, but right now it won't really help you sell, so no point.