Understanding the Power of Assumption Clauses to Ease Home Sales§
Some lenders include an assumption clause as part of a mortgage note, offering a significant advantage to homeowners eager to sell. An assumption clause enables the new buyer to effectively take on the existing mortgage, simplifying the transaction considerably. This can be an attractive selling point since it obviates the need for the buyer to undergo a full loan application process.
However, this does not imply there are zero issues associated with mortgage assumption. One crucial aspect is the gap between the house’s sale price and the existing mortgage balance. For instance, if the home is selling for $200,000 but the seller’s assumable mortgage stands at $100,000, the buyer will be responsible for securing an additional mortgage to cover the remaining $100,000 or pay that amount in cash.
Moreover, assumption clauses typically involve a transfer fee, which needs to be considered in the transaction cost. Importantly, any mortgage featuring an assumption clause cannot contain a due on sale clause, ensuring the mortgage can be transferred smoothly without triggering immediate repayment.
Overall, leveraging an assumption clause can streamline the home selling process and potentially make the property more appealing to prospective buyers, although both parties must remain vigilant about the associated details and financial obligations.
Related Terms: due on sale clause, mortgage note, home financing, real estate transaction, loan assumption.
