A mortgage assumption is one of many options to get out of foreclosure. The general idea of the concept seems like a great option, but there are some things to consider when trying to pursue a mortgage assumption. We are going to explain exactly how the process works and what to consider.
What is a mortgage assumption?
A mortgage assumption is when another party assumes your mortgage. They take on your mortgage, relieving you of the responsibility. It sounds simple, but it is actually a pretty lengthy process.
Essentially, the other party has to go through the exact same process as if they were getting a new loan. They have to go through the qualification process, supplying all of their financial information to the mortgage company or bank. The mortgage company or bank then has to decide if they are willing to allow the other party to assume your mortgage. Some companies do not allow this.
It’s really the exact same process as if you sold your home to someone for an amount that would require a loan equal to your current loan balance.
What happens to the interest rate on a mortgage assumption?
The interest rate of the mortgage being assumed stays the same. So if you got your mortgage during a period of time when rates were at historic lows, the new party assuming your loans gets to keep that low rate.
That makes a mortgage assumption very attractive to the new owner, which is why mortgage assumptions at face value seem like great options to help you get out of foreclosure.
Unfortunately, because of this aspect, banks do not find mortgage assumptions favorable for them. And that brings us to our next point.
Why wouldn’t a bank want to do a mortgage assumption?
In our current interest rate environment when compared to historical interest rates, it is very obvious that a mortgage assumption is not in the bank’s interest (no pun intended). If your interest rate is low and current market rates are higher, the bank doesn’t want to generate a new loan at a rate that is below market.
Remember, although the name sounds like the mortgage is just being “transferred,” the process actually requires the creation of a new loan. This means the bank is having to go through the same efforts of creating say a mortgage at a 6% interest rate just to generate a 3% interest rate loan. That’s not ideal for them.
What is the better option than a mortgage assumption?
There is only one option that is better that a mortgage assumption and that is what we do here are Freedom Foreclosure Rescue. Our process benefits both sides of the deal–you the owner and the bank.
You are able to get of foreclosure much faster than by going through a mortgage assumption and the bank doesn’t have to do any additional work on originating a new loan or modifying the existing loan.
This makes it the best option because your foreclosure problem gets solved very quickly, you get the maximum value for your property and we help you with your moving. The bank receives the full delinquent amount they are owed and they continue to receive the monthly payments.
Freedom truly offers the only win-win solution.