What is a loan assumption?
An assumption is a transaction in which a person takes over responsibility for the loan exactly as it is. The terms, interest rate, principal balance, and monthly payments do not change. The new owner takes over payments on the existing loan and pays the seller the difference between the sales price and the balance on the loan. The monthly payments are made without lapse.
Can someone else assume my loan (take over payments)?
An “informal” assumption takes place when someone other than the purchaser takes over the obligation of a contract. This “informal” assumption does not release the financial obligation of the current purchaser. The original purchaser is still responsible for making payments if the new purchaser fails to pay or defaults on the contract. Permission from the original note holder may be required before the assumption process starts. This would release the current purchaser from the obligation to pay. There is no approval process or credit decision made with these types of assumptions. As long as the new buyer provides us with the information needed and the processing fees, we will change the purchaser names in our computer system. This is because the original purchaser still maintains the obligation to pay if the new purchaser defaults on the loan. If someone wants to assume your mortgage with a “due on sale” clause, the note must be re-written by our mortgage services department.