Assumption Clause


DEFINITION of 'Assumption Clause'

A provision in a mortgage contract that allows the seller of a home to pass responsibility to the buyer of the home for the existing mortgage. In other words, the new homeowner assumes the existing mortgage. There are typically many conditions and a fee required in an assumption clause.

BREAKING DOWN 'Assumption Clause'

An assumption clause can be an attractive selling point for a homeowner if the interest rate on the existing mortgage is lower than current market interest rates. In addition, loan settlement costs for the buyer can be avoided. However, there are many hurdles to get over in an assumption. For example, most mortgages have due-on-sale clauses which prevent assumptions, and the remaining principal balance of the existing mortgage is likely to less than the sales price of the home.

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  1. How many FHA loans can I have?

    Generally, the Federal Housing Administration (FHA) does not insure more than one mortgage per borrower. This is to prevent ... Read Full Answer >>
  2. Are FHA loans assumable?

    Loans insured by the Federal Housing Administration (FHA) on or after Dec. 15, 1989, are assumable by qualifying borrowers. ... Read Full Answer >>
  3. How accurate are online mortgage calculators?

    Online mortgage calculators are accurate to the extent that the calculator itself is asking for the right pieces of information ... Read Full Answer >>
  4. Are mortgage rates negotiable?

    Mortgages are just as negotiable as any other product or service. Whether it's a new home purchase or refinancing of an existing ... Read Full Answer >>
  5. Are FHA loans fixed?

    An FHA loan is a mortgage loan backed by the government that offers more flexible lending requirements than those of conventional ... Read Full Answer >>
  6. Does an FHA loan require a down payment?

    Federal Housing Administration (FHA) loans require down payments, which can be as low as 3.5% of the total purchase price ... Read Full Answer >>

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