One option to consider when buying or selling a home is an assumable mortgage. In certain situations, it can be a good financial choice.
An assumable mortgage allows a buyer to just take over the current mortgage on a home instead of getting new financing. There can be some good reasons to do this. If the current mortgage has a lower interest rate than the buyer can get, the buyer may want to get an assumable mortgage. For the seller, a low interest rate with an assumable mortgage can make the home very appealing. Another reason for this mortgage is it saves on closing costs.
Assumable mortgages are not as popular as they once were, such as during times when interest rates were much higher. Now, interest rates are relatively low although they tend to be rising overall. This may lead to assumable mortgages once again becoming popular.
Some lenders have due-on-sale clauses in their mortgages. This makes an assumable mortgage impossible since the loan has to be paid off on the sale of the home. Before trying to buy a house with an assumable mortgage, be sure that it does not have this clause attached to the loan. Also, if selling, make sure that the lender completely removes you from the mortgage note once the transaction has been made so that the home becomes completely the buyer’s responsibility.