A type of financing in which one person may take over the mortgage from another. For example, Buyer 1 wants to buy a house, so he takes out a mortgage (borrows money from the bank to pay for the house). If Buyer 1 wants to sell the house to Buyer 2 before the mortgage is paid off, and the loan is an assumable mortgage, Buyer 2 may "step into the shoes" of Buyer 1 and take over the mortgage.
If this were not an assumable mortgage, Buyer 2 would have to go to the bank, get his own loan, and use that to buy the house off of Buyer 1. Buyer 1 would then use the proceeds to pay off his mortgage.
Definition from Nolo’s Plain-English Law Dictionary
A home mortgage that allows the buyer to take over the seller's mortgage; that is, to step into the seller's shoes, make mortgage payments, and comply with other terms of the existing loan. Most lenders require the borrower to qualify for the mortgage in order to assume the mortgage.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:27 pm