Think Twice Before Assuming Someone Else’s Mortgage

Journalists have been saying for at least a year that the only way you can afford to be a first-time homebuyer is if your parents give you money for a down payment, co-sign with you on the mortgage loan, or both.  Where does that leave the rest of us who do not have wealthy parents who can afford to help us with such things?  These days, home prices are so high and mortgage interest rates are so expensive that the dream of homeownership is farther out of reach than it has been in decades.  The next best thing is to buy a house with an assumable mortgage.  When you do this, you buy the house from its current owner and also assume responsibility for the seller’s mortgage loan, and the principal balance and interest rate remain the same.  Of course, like most ostensibly financially beneficial things in this world, getting an assumable mortgage is not easy, and if you get one, you should be careful what you wish for.  A Plantation foreclosure defense lawyer can help you think through your options before you assume someone else’s home mortgage loan or let someone else assume your mortgage.

Are Assumable Mortgages the Best of All Possible Worlds?

Federally backed mortgages, such as those issued by the FDA, USDA, or VA, are assumable, which means that, when the original borrower sells the house, they can let the buyer assume the mortgage loan of its terms.  Assumable mortgages are a uniquely attractive option when interest rates are high, because buyers jump at the opportunity to sign a mortgage loan with an interest rate so low that the likes of it have not been available for years.  Of course, this means that the buyer must also compensate the seller for the value of the house minus the outstanding balance on the mortgage.  Therefore, assumable mortgages are most affordable when the seller does not have much equity in the house, as often happens with federally backed mortgages, because these have long repayment terms and low requirements for down payments.

The Risks of Assumable Mortgages

Assuming that you can afford the down payment required to assume someone else’s mortgage, you should consider the risks first.  If you take on the mortgage through the process of simple assumption, then if you default on the loan, not only will you be liable, but so will the original borrower.  Therefore, you will have to work even harder to earn the original borrower’s trust so that he or she will agree to transfer the mortgage to you.  The other option is to assume the mortgage through the novation process.  If you do this, you must get approval from the lender, just like you would if you were applying for a completely new mortgage.

Work With a Debt Lawyer About Unaffordable Mortgages

A South Florida debt lawyer can help you if you are struggling with debts that are making it harder to qualify for a mortgage loan or pay your current mortgage.  Contact Nowack & Olson, PLLC in Plantation, Florida to discuss your case.

Source:

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