Well first of all, this is a really good term for you to be aware of. If you’re asking this question then what it likely means is that there’s a house that you would like to buy and you’d like to skip over the bank and here’s what it looks like. We’ve got the people that live here in the house, they’re the ones in the window right here and then we got you, these are the steps and you’re walking up the steps and you’re knocking on the door. This is you and this is them. Now in this mortgage assumption agreement, there’s a reason why they want out of the house and instead of selling it there’s a reason why they’re not. Maybe there’s a divorce going on or life got complicated or something’s happening, maybe there was a death in the family and they just don’t know how to really get rid of the house. So you come along and you say, I have a special agreement and it’s called a mortgage assumption.
I’m going to assume your existing mortgage and all become responsible for it. You’re under hardship or you’re not making your payments or something’s happened so you move out of the house and I’m going to take over the mortgage. Now if you do a mortgage assumption agreement, did you bypass banks? Yes. Did you bypassed credit checks? Yes. Did you bypass needing to put a down payment? You might have need to pay them $5,000 for them to enter into the agreement or it’s nope, just please take over the deal. So a mortgage assumption agreement is basically you coming in and saying sign this paperwork, I’m still responsible for the mortgage. Now there are a couple technicalities you need to understand. If you sign a mortgage assumption agreement, whose but is still online for the original mortgage?
Is it you or theirs? It’s the original people still living in the house. If you do this agreement by the way, the bank’s all they really care about is that the mortgage gets what? They just want to know that the mortgage is going and so they’re going to make sure that that happens and so even though you’re taking over the mortgage, what you’re doing is you’re controlling the house and you’re saying I’m now responsible for making payments on this house however, the big difference is that their credit is still on the line you’re borrowing their credit, you’re borrowing their bank. Now not always good news like let’s just say for a moment that they got a crazy mortgage and it’s variable and interest rates go up and you started the deal where you are at a 6% interest rate but it goes up to 10%. Maybe the payment gets four or five hundred dollars more a month, who has to pay that? Well you’re the one that signed the paper saying you’re committed to paying that.
If you don’t pay it and they don’t pay it, their credit is going to get big-time in trouble down the toilet but they’re going to be legally upset at you if you said you’re responsible and sometimes when things like this happen, you just give the mortgage back to him they like, sorry, I’m out and these things happen, it’s something that actually happened to me one time. You want to make sure that you’ve got proper agreement, you’ve got good paperwork and then one other risk to be aware of technically if the bank found out that you were doing a mortgage assumption agreement, it could trigger what’s called the acceleration clause. Is it legal? A hundred percent yes. This just comes down to individual banking policy and banks all have different policies that’s the policy in general so mortgage assumption agreement is your ability to step into someone else’s house, assume the mortgage, start making the payments on their behalf, take over the mortgage and basically require real estate with little or no money and certainly no credit.