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.

RELATED TERMS
  1. Release Clause

    A release clause is a mortgage term that refers to a provision ...
  2. Due-On-Sale Clause

    A provision in a mortgage contract that requires the mortgage ...
  3. Assumable Mortgage

    A type of financing arrangement in which the outstanding mortgage ...
  4. Alienation Clause

    A clause in a mortgage contract that requires full payment of ...
  5. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against ...
  6. Best Efforts Mortgage Lock

    When the sale of a mortgage in the secondary mortgage market ...
Related Articles
  1. Home & Auto

    Comparing Reverse Mortgages vs. Forward Mortgages

    Which one a homeowner chooses depends on where you are at this point in your life, personally and financially.
  2. Home & Auto

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  3. Products and Investments

    Reverse Mortgages: Right for Clients? Not Often

    Reverse mortgages are a legitimate vehicle for folks age 62 and up to tap into the equity in their homes for other uses. Here's what to consider with them.
  4. Home & Auto

    Mortgage Options For Underwater Homeowners

    Find out what options are available when your mortgage is greater than the value of your home.
  5. Options & Futures

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  6. Home & Auto

    How Does A Reverse Mortgage Work?

    A homeowner who’s at least 62 years old can use a reverse mortgage to tap into her home’s equity for money. The house serves as the loan’s collateral. The loan is repaid when the homeowner dies, ...
  7. Retirement

    Additional Streams of Income for Seniors

    Find out how a reverse mortgage can work in your favor during retirement.
  8. Credit & Loans

    Mortgage Basics: Conclusion

    By Lisa SmithLet's recap what we've learned in this tutorial: At its most basic, a mortgage is a loan used to purchase a house. There are two primary types of mortgages: fixed rate and ...
  9. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  10. Credit & Loans

    5 Signs a Reverse Mortgage Is a Bad Idea

    Here are the key situations when you should probably pass on this type of home loan.
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. What are the requirements to apply for a reverse mortgage loan?

    For homeowners of a certain age who wish to stay in their homes but are finding it costly, a reverse mortgage could be the ... Read Answer >>
  4. Is it a good idea to add a reverse mortgage to your retirement strategy?

    A reverse mortgage can be a great way to increase retirement income. Does it work for everyone? What happens after a homeowner ... Read Answer >>
  5. 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. Sorry to disappoint, but there ... Read Answer >>
  6. What are the pros and cons of a simple-interest mortgage?

    Learn the difference between a simple interest mortgage and a standard mortgage, along with their relative advantages and ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center