Assumable Mortgage

AAA

DEFINITION of 'Assumable Mortgage'

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.

INVESTOPEDIA EXPLAINS '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. Due-On-Sale Clause

    A provision in a mortgage contract that requires the mortgage ...
  2. Reduction Certificate

    A document signed by a lender stating the outstanding amount ...
  3. Mortgage Banker

    A company, individual or institution that originates mortgages. ...
  4. Default Premium

    The additional amount a borrower must pay to compensate the lender ...
  5. Mortgagee

    An entity that lends money to a borrower for the purpose of purchasing ...
  6. Mortgage Servicing Rights - MSR

    A contractual agreement where the right, or rights, to service ...
Related Articles
  1. 4 Steps To Attaining A Mortgage
    Credit & Loans

    4 Steps To Attaining A Mortgage

  2. When (And When Not) To Refinance Your ...
    Home & Auto

    When (And When Not) To Refinance Your ...

  3. What is an assumable mortgage?
    Investing

    What is an assumable mortgage?

  4. What are the benefits of an assumable ...
    Investing

    What are the benefits of an assumable ...

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center