Assumable mortgage is a term for mortgages that can be transferred to another person. If a mortgage is assumable, the selling owner transfers the title and mortgage to the buyer instead of the buyer getting a different mortgage. This process can save the buyer fees and lots of money on interest if the mortgage has lower interest than the market. However, this mortgage transfer can only occur if it is assumable, if the creditors agree to the transfer, and the buyer satisfies the financial requirements for the mortgage. Sellers must be careful because they may still be liable for the mortgage even after the sale to the buyer, unless the creditors specifically release them from the mortgage. Buyers also must consider the benefits of an assumable mortgage where the mortgage only covers a portion of the purchase price because they may still have to get their own mortgage to cover the rest. For example, if Clement sells their house to Dominique for $300,000 and transfers their assumable mortgage of $200,000 to Dominique, Dominique still may have to acquire their own mortgage of $100,000 to cover the rest of the purchase price, and in these cases, it may be cheaper and more practical for the buyer to acquire their own mortgage for the whole purchase.
[Last updated in December of 2021 by the Wex Definitions Team]