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SIMPLE ASSUMPTION OF A LOAN

Author: Jessica Bennet
Community Mentor
Ask Jessica
Posted on: 12th Nov, 2005 11:33am
Simple assumption is a process by which a buyer assumes or takes over the seller's mortgage obligation. But this doesn't mean that the seller is release from the liability. That's the reason, simple assumption is also known as transfer with no release of liability.


When you assume a loan and default, the original seller is secondarily responsible for paying off the unpaid balance. And the lender cannot seek a deficiency judgment against the original borrower if he fails to recover the unpaid debt by selling the home.


If you assume your parents' loan, they are not completely released from the liability and hence the loan payments will be reflected in their credit reports and not yours. However, if you default, then your parents' credit report will reflect an outstanding mortgage and it will be difficult for them to seek any other loan.
Posted on: 12th Nov, 2005 11:33 am
yes, can u tell me more about simple assumptions and what does it mean transfer with no release of liability? my parents made a mortgage for me to buy a home 4 years ago. i paid the notes. they have passed away and the property and double wide home was willed to me. we done a assumption of the loan with our morgage comp. and lawyer 4 months ago. my main concern right now someone told me that this will not go on my credit. the loan co. says it is only in my name that my parents names have been removed. can you tell me anything about this.I am tring to rebuild my credit and i feel having a mortgage and keeping the payments up will help improve it. is there something i can do? any information would be helful. thank you
Hi JILL,

In Simple Assumption (no release of liability) you remain legally liable for the mortgage even after you sell the property. Think of it this way: If you have a mortgage note that you owe to a lender, simply selling your property and having the new buyer take over your mortgage payments does not eliminate the mortgage. That mortgage still exists. You still owe what you originally agreed to repay on that mortgage. There is no new mortgage. You have not been removed from the picture.

Hope my points helped in clearing your confusion.

Hale.
Posted on: 12th Nov, 2005 11:59 am
Hi Jill,

I would like to add one more point to what Hale said.

Its that the payments are still your responsibility. The fact that you sold the property and accepted a cash down payment has no effect on your mortgage obligations to the lender.

If the buyer defaults on the mortgage payments, the lender may report a delinquency or default which may show up on your credit report and the public records may reflect a foreclosure against you.

Whatever happens with the mortgage payments will definitively effect your credit.
Adrian
Posted on: 12th Nov, 2005 02:46 pm
thanks for the answers but do yall understand that I assumed the mortgage from my parents thru a will, they are both deceased. I am concerned that my timely payments wont be sent to credit bureau to help build my credit. one other thing, are you saying I wont be able to ever sell my place? Not thru an assumption just out right sell it? thanks again
Posted on: 12th Nov, 2005 05:39 pm
Hi Jill,

Welcome to MortgageFit Forums.

Let me tell you that you cannot just sell the property without considering an assumption clause. This means that you will have to look out for a buyer who will take up the liability of paying off the mortgage within the time period that is specified on the mortgage note. That is, the mortgage will then be taken as an assumable mortgage with the buyer making the monthly payments for its repayment. The reason behind selling it without an assumption is that the mortgage note, being a legal document, you need to follow what is stated there.

God Bless You.

Thanks,
Samantha
Posted on: 13th Nov, 2005 07:22 pm
I am trying to put my mothers house in my name. She has a medical problem and has to move to her sister's house to be looked after. I am concerned about medicare/medicade placing a lien on the home after I have assumed the mortgage. Is this a valid concern, if so, how can I obtain the property with out the government taking it from me?
Posted on: 27th Apr, 2006 03:02 pm
hi shawn,

you may go for a quit claim deed and transfer your mother's interest in the house to your name. get a good attorney to help you in this matter.

as real estate transfers are critical, so a professional's help is always required. discuss with him in detail to check if that can save your home.

regards,
blue
Posted on: 27th Apr, 2006 03:19 pm
Hi Shawn,

I feel for your mother's health. Hope she recovers soon. I understood your problem and worry.

Your mother can quit claim the house in your name but you know that a quit claim deed only transfers the interests in the property and doesn't guarantee whether there is already in the lien in the property or not.

I shall advise you to better consult an attorney and be on a safer side with whatever you do. Wish you good luck.

Thanks,
Caron
Posted on: 27th Apr, 2006 03:39 pm
I AM SELLING MY VACATION HOME TO MY SISTER BY MEANS OF ASSUMPTION AND IT IS APPROVED BY MY LENDER. DO I STAY ON THE HOMEOWNER AND JUST ADD MY SISTER ? DO I NEED TO DO A Q-CLAIM DEED TO MY SISTER? IF SHE DEFAULTS, CAN I PAY THE PAYMENTS AND GET HER NAME OFF THE MORTRAGE ?
Posted on: 05th Jan, 2007 02:35 pm
Hi Bush,

Welcome to Mortgagefit discussion board.

It is not necessary to quit claim the home to your sister, as lender has agreed to let her assume the mortgage. What you can do is add her to the title of the home as part owner using the quit claim deed.

In case she defaults, you will be liable to continue making the payments as assumption does not remove you from the mortgage obligation.

Thanks
Blue
Posted on: 05th Jan, 2007 03:13 pm
Hi Bush,

Since you are selling the property to your sister, there should be transfer of title from you to your sister and for this purpose a quit claim deed can be used.

If she defaults, you can help her with the payments. But whether you can replace her on the loan is a matter of doubt. This will probably depend on the lender.

It will be better if you clarify this issue by asking the lender.

God bless you.

Samantha
Posted on: 06th Jan, 2007 12:44 am
My boyfriend and I are spliting up and I want him to buy me out of the home sincewe both are on the mortgage. What is the best way to go as I would like to financial benefit from this as I will be moving to another state.
Posted on: 27th Aug, 2007 06:09 pm
How long it has been that the loan was taken. You must have contributed towards its repayment. You should ask for that share to be returned. In addition you have a right to a part of the equity that has developed in the house.
Posted on: 27th Aug, 2007 06:44 pm
Hi Guest,

If you wish to sell your share of the property to your boyfriend, do not sell it with too much profit. In that case, you have to pay the applicable capital gains tax on the profit earned through sale. But if you are staying in this house for the past 2 years, you may be eligible for reduced gains exemption.

BTW what type of financial benefit are you looking for?
Posted on: 27th Aug, 2007 11:44 pm
larry,

Reduced gains exemptions are meant for those who stay in the property for less than 2 years prior to the sale. I'm confused, is what you mean correct?
Posted on: 28th Aug, 2007 05:29 am
Adonis,

I meant to say that if the person lives in the house for less than 2 years, he may be eligible for the reduced gains exemption.
Posted on: 29th Aug, 2007 03:10 am
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