In real estate an assumed mortgage occurs when a the buyer of a real property is transferred all the obligations of the seller's mortgage. The buyer assumes all the obligations under the mortgage, just as if the loan had been made to the buyer. The major driving force behind assumptions is the lower interest rate on the assumed mortgage relative to current market rates. This method is frequently used when the buyer can not get a better interest rate than the seller currently has. The seller may or may not remain secondarily liable for payments. See Assumable Mortgage. Assumbable mortgages usually save the buyer many dollars with regard to origination and loan fees as the agreement is usually between the buyer and the seller and the original loan is not usually altered.

Pitfalls of the Assumed Mortgage

Care must be taken by the seller that the buyer will keep the property in good shape and the buyer will meet the notes as described in the aggreement. If the buyer defaults on the agreement the seller can take over the home again but the process could get ugly. A buyer that is in default will have a tendency to also be in default with regard to home maintainance and maybe even property taxes. This can be an easy loan for the buyer but could come back to haunt the seller..