What is an 'Assumable Mortgage'

An assumable mortgage is a type of financing arrangement in which the outstanding mortgage and its terms can be transferred 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.

BREAKING DOWN 'Assumable Mortgage'

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 will need a down payment of $140,000 to cover the difference, or will have to get a separate mortgage to secure the needed funds.

RELATED TERMS
  1. Best Efforts Mortgage Lock

    When the sale of a mortgage in the secondary mortgage market ...
  2. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  3. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  4. Mortgage Rate

    The rate of interest charged on a mortgage. Mortgage rates are ...
  5. Home Mortgage

    A loan given by a bank, mortgage company or other financial institution ...
  6. Reduction Certificate

    A document signed by a lender stating the outstanding amount ...
Related Articles
  1. Personal Finance

    5 Reasons To Save For A Big Mortgage Down Payment

    You may be anxious to buy a home, but taking time to save a large down payment has numerous advantages.
  2. Personal Finance

    Behind the Scenes of Your Mortgage

    Four major players slice and dice your mortgage in the secondary market.
  3. Personal Finance

    Can President Trump Affect Mortgage Interest Rates?

    Can President Trump affect mortgage interest rates?
  4. Personal Finance

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  5. Personal Finance

    7 Mortgage Trends To Expect In 2011

    How will the year compare to 2010? What's likely to be different?
  6. Retirement

    Additional Streams of Income for Seniors

    Find out how a reverse mortgage can work in your favor during retirement.
  7. Insights

    How Interest Rates Affect the Housing Market

    Understand how rate changes can affect home prices and learn how you can keep up.
  8. Personal Finance

    Ways to Be Mortgage-Free Faster

    Getting rid of this debt faster has bigger benefits than you might think.
  9. Personal Finance

    The Benefits of Mortgage Repayment

    Buying a home may be the biggest debt you'll ever incur. Learn why you should retire it sooner, rather than later.
  10. Personal Finance

    Now's a Terrific Time to Buy (or Refinance) a Home

    If you are looking to make a purchase or do a refi, you will benefit from continuing low interest rates – that could dip even lower.
RELATED FAQS
  1. What is an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
  2. What are the benefits of an assumable mortgage?

    An assumable mortgage allows the purchaser of a property to assume the mortgage from the property's seller. The benefits ... Read Answer >>
  3. Are FHA loans assumable?

    Learn the advantages and disadvantages of assuming an FHA-insured mortgage. Assuming loans with lower interest rates can ... Read Answer >>
  4. If My Mortgage Lender Goes Bankrupt, Do I Still Have to Pay My Mortgage?

    Yes, if your mortgage lender goes bankrupt you do still need to pay your mortgage obligation. Here's what usually happens ... Read Answer >>
Trading Center