Assumable Mortgages Are Overrated

An assumable mortgage is one where the homeowner can transfer responsibility for the mortgage loan, and with it ownership of the house, to another borrower.  Especially in today’s housing market, it seems like an irresistibly good option.  After all, the main draw of an assumable mortgage is that the new borrower gets to keep the same interest rate at which the original borrower took out a loan.  Given that today’s interest rates on home mortgage loans, an assumable mortgage is the next best thing you can get to ride in a time machine back to when homeownership was several orders of magnitude more affordable than it is today.  Of course, just as real time travel would cause enough unforeseen problems to fill a feature length film, if not multiple seasons of a bingeable series on the streaming platform of your choice, assuming someone else’s mortgage comes with plenty of potential drawbacks, as does letting someone else assume your mortgage.  If you are thinking of assuming someone else’s mortgage because it is the only way you can afford to buy a house, or letting someone else assume your mortgage because it is the clearest path to avoiding foreclosure, contact a Philadelphia debt relief lawyer.

What Can Go Wrong With an Assumable Mortgage?

Approximately 25 percent of the currently active home mortgage loans are assumable mortgages, which means that it is possible for the current borrower to sell the house that secures the mortgage and for the buyer to take over the mortgage loan with the same interest rates.  This option is only available for federally backed mortgage loans, such as FHA mortgages.

If something sounds too good to be true, it probably is.  The first problem with assumable mortgages is that you can only get one if you can pay a down payment equal to the value of the house minus the outstanding mortgage principal balance.  This is only affordable for buyers if the seller bought the house for a low price and has barely made a dent in the loan principal, which is possible, and if the value of the house has not increased much, which is highly unlikely.  In other words, looking for an affordable property with an assumable mortgage is like trying to catch a unicorn.

Furthermore, if you assume the mortgage through simple assumption, both you and the seller are liable if you default on the mortgage; this means that you must earn the seller’s trust before he or she lets you assume the mortgage.  The other option is to assume the mortgage by novation.  If you do this, you will have to go through an approval process similar to what you would do if you were applying for a completely new mortgage loan.

Contact CONSUMERLAWPA.com About Debts That Pile Up Despite Auto Pay

A Philadelphia consumer law attorney can help you if you are struggling with debts, and these are getting in the way of your dream of homeownership.  Contact CONSUMERLAWPA.com to set up a free, confidential consultation.

Source:

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