ASSUMPTION OF MORTGAGE Meaning and
Definition
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The "assumption of mortgage" refers to a legal process wherein a new person assumes the liability and responsibility for an existing mortgage that was originally entered into by someone else, usually the current homeowner. This assumption typically occurs when the property is sold or transferred to a new owner, and the new owner agrees to take over the mortgage payments and the terms of the loan.
When assuming a mortgage, the new owner becomes legally obligated to repay the outstanding loan amount, make regular mortgage payments, and comply with all terms and conditions stipulated in the original mortgage agreement. This includes fulfilling obligations such as interest rates, loan duration, and payment schedules. The lender's consent is usually required before the assumption can take place, and they may review the creditworthiness of the new owner to assess their ability to repay the loan.
Assuming a mortgage can be advantageous for the new owner, as it allows them to acquire a property without the need for a new mortgage application, potentially saving time and costs associated with obtaining new financing. However, assuming a mortgage also puts the new owner at risk since they are accountable for any outstanding debt and potential penalties, should they fail to meet their payment obligations.
In summary, the assumption of mortgage involves the transfer of an existing mortgage from one individual to another, typically occurring when a property changes ownership.
