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Is an Assumable Mortgage Right for You?
There are a lot of creative lenders out there that will try to sell you all sorts of interesting mortgages. It can be a lot to digest, especially if you are a first time buyer or haven't spent hours researching the many different types of loans. One interesting options that a lot of people never consider is an assumable mortgage. You don't go to a broker for this one and it's not always talked about, but it may be right for you.
An assumable mortgage is exactly that. The buyer assumes responsibility for the current mortgage that the seller holds. There are pros and cons for both sides so be sure you do your homework before asking for an assumable mortgage.Why would I want an assumable mortgage instead of a traditional 30 year fixed?
Most often, an assumable mortgage is only beneficial when the buyer can get a lower interest rate this way instead of a traditional loan. Current interest rates could be higher or the buyer could have poor credit. Either way it would be beneficial to obtain a lower interest rate.
Is it free?
Before choosing an assumable mortgage, find out what the fees are and if there is any assumption fee. On the other hand, with an assumable mortgage you can avoid some closing costs associated with a traditional loan. Decide if this would be more beneficial than a traditional loan and go from there.
Liability when you take up an Assumable Mortgage?
Though it depends on the terms of the mortgage, a seller may be held liable for damage to the home from fire or otherwise. For this reason, a seller may be cautious before offering an assumable mortgage. If you were to burn the house down, they don't want to be held liable for it.