If you intend to assume a mortgage for your next property purchase, then you may be presented with a deed of assumption. Deeds of assumption evidence, simultaneously, the transfer of property ownership and the transfer of mortgage responsibility from the seller to the buyer. Once a deed of assumption is properly executed and recorded in your state, it is public knowledge that both the property and the mortgage now belong to you.
An assumable mortgage is one where the buyer takes over the seller's mortgage instead of getting a new mortgage. The buyer takes the mortgage at the seller's interest rate and terms, which could be a good deal depending on the market. Buyers must still qualify for an assumable mortgage and receive the lender's approval for the assumption. Federal Housing Administration (FHA) and Veterans Administration (VA) insured mortgages are two examples of assumable mortgages.
Deeds and Assumable Mortgages
A deed is a written document that evidences the legal transfer of ownership of real estate. Both the grantor and grantee must sign the deed and record it in a local land records office in order for the deed to be valid. A deed of assumption is a single deed that includes both the language of a general warranty or other deed along with the acknowledgement that the buyer is taking over the mortgage on the property.
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Effect of a Valid Deed of Assumption
Once a valid deed of assumption is recorded, the community is put on notice that both the property and the mortgage now belong to the buyer. Creditors and other persons with an interest in the mortgage or the property are now required to contact the new buyer. Despite the recording, the lender can still hold the seller responsible should the new buyer foreclose and the lender sells the property at less than the mortgage balance.
Your State's Law
Deeds of assumption may be identified by different names in different states. If you decide to purchase real estate with an assumable mortgage, be sure to understand how real estate transactions involving assumable mortgages are conveyed and recorded in your state. Also, clarify the terms of the assumption agreement. A local real estate attorney is the best resource for guidance regarding real estate transactions with deeds of assumption. Also consult your lender and local title agent.
Based in Richmond, Va., Karen Brown began her professional writing career in 1992. She has expertise in legal topics, federal administration, small-business issues and technical writing. Brown holds a Juris Doctor from The Ohio State University Moritz College of Law.