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Assumable Mortgage A type of financing arrangement in which the outstanding mortgage and its terms can be transfered from the current owner to a buyer. By assuming the previous owner's remaining debt, the buyer can avoid having to obtain his or her own mortgage. Investopedia Says: Buyers are typically attracted to homes with existing assumable mortgages during times of rising interest rates. This is because they can assume the seller's mortgage, which was created when interest rates were lower, and use it to finance their purchase.
However, if the home's purchase price exceeds the mortgage balance by a significant amount, the buyer will either need to provide a sizable down payment or obtain a new mortgage anyway. For example, if a buyer is purchasing a home for $250,000, and the seller's assumable mortgage only has a balance of $110,000, the buyer would need a down payment of $140,000 to cover the difference, or would have to get a separate mortgage to secure the needed funds. Related Terms: Conventional Mortgage Default Premium Due-On-Sale Clause Graduated Payment Mortgage Mortgage Banker Mortgage Broker Mortgage Servicing Rights - MSR Mortgagee Origination Purchase-Money Mortgage |