Take Over Mortgage

Posted by Nick Niesen on October 29th, 2010

The loan known as a take over mortgage is designed so that the conditions and terms of a loan can change hands between two borrowers. That?s to say, one borrower can transfer the mortgage to a new borrower. It?s also called an assumable loan

People buying a home can take over a seller?s mortgage when they complete the transaction. Usually, you?ll need to get the lender?s approval before doing so. When you get a take over mortgage, monthly payments and interest rates come into your hands. That?s a big plus because it means it?s possible for you to save big money, particularly so if the existing loan?s interest rate is lower than the current one on newer loans. Be aware though that lenders are able to change the terms of the loan. So be prepared if that happens.

You also inherit liability when you take over a mortgage, along with the monthly payments and interest. If you don?t make the payments, for example, the lender can foreclose. Also, if the property in question ends up selling for a lower price than the mortgage?s balance, the lender can sue you for the remaining difference.

Don?t think of a take over mortgage as a walk in the park. It?s not. You have to go through a process of pre-qualification. You also have to pay closing fees before you get one. There?s also the cost of title insurance and appraisal.

For instance, let?s say you wanted to buy your friend?s house for $95,000, and the home?s take over mortgage came to $90,000 and had an interest rate of 7 percent. You?ll only have to make a down payment of $5,000 to take over the mortgage and home. You need to factor in the closing fees as well.

Another such example would be if a friend of yours took over a mortgage 15 years ago for $80,000 and with an interest rate of 6.5 per cent. The balance left over would be $70,000. What that means is that the current worth of the property is $160,000. To get a take over mortgage, only $90,000 would be required, in addition to the price of the closing costs.

Such mortgages have been available for a long time now. Take over mortgages let the consumer have the opportunity to get a loan at a lower interest rate, which makes them quite popular.

There was an all-time rise in take over mortgages during the ?70s and ?80s because of the soaring interest rates. The mortgages at the time had rates of five to seven percent, but as soon as the rates went up, so did the original percentages. This forced a payout of between 10 and 15 percent in the interest tied to deposits. That?s what prodded buyers to go for take over mortgages. They simply wanted loans that had lower rates.

If you?re in the market for a take over mortgage, don?t forget the cliché about things sounding too good to be a reality. There are also benefits in take over mortgages for sellers. For one, they are likely to charge higher prices for their houses. So you may need more money to make up the difference between the balance of the take over mortgage and the asking price. But remember the fact that assuming the terms of the mortgage means you can cash out at a later point; the value of the property might well go up in time.