An assumable mortgage is one which lets a buyer take over the existing loan of a seller. Assumable mortgages require the lender's approval. The person who assumes a mortgage takes the same interest rate and monthly payment schedule as the original loan, which can result in big savings if the interest rate on the existing mortgage is lower than the current rate on new loans. However, the lender can change the loans terms. The person assuming a mortgage still needs to qualify for the loan and pay closing fees, including the costs of the appraisal and title insurance.
The lender also holds the seller liable for the loan. For example, if the person assuming the mortgage defaults on payments and the lender forecloses, but the property sells for less than the loan's balance, the lender can sue the seller for the difference.
The California General Form of Agreement of Sale of Residential Property with Assumption of Existing Mortgage or Deed of Trust is a legal document that outlines the terms and conditions for the sale of a residential property in California, where the buyer assumes the existing mortgage or deed of trust. This agreement is commonly used when the buyer intends to take over the mortgage or deed of trust that is already in place on the property they are purchasing. It enables them to assume the responsibility for the outstanding loan balance, interest rates, and any other terms of the existing mortgage or deed of trust. This type of agreement is beneficial for buyers as it allows them to leverage the existing financing and potentially avoid the need for new loan applications and qualification processes. It can also be advantageous for sellers who may benefit from faster and smoother transactions. The California General Form of Agreement of Sale of Residential Property with Assumption of Existing Mortgage or Deed of Trust typically includes the following key elements: 1. Parties Involved: The agreement identifies the buyer, seller, and any other parties involved in the transaction, such as lenders or real estate agents. 2. Property Details: This section describes the residential property being sold, including its address, legal description, and any applicable parcel numbers. 3. Purchase Price and Terms: The agreement outlines the agreed-upon purchase price for the property and any additional terms and conditions, such as contingencies or financing arrangements. 4. Assumption of Existing Mortgage or Deed of Trust: This clause contains details of the existing mortgage or deed of trust, including the outstanding loan balance, interest rates, payment terms, and any other relevant factors. 5. Closing and Escrow: The agreement defines the closing processes and timelines, including the responsibility for closing costs and the use of escrow agents. 6. Lender Approval: The buyer's assumption of the existing mortgage or deed of trust is typically subject to the lender's approval. This section outlines the process for obtaining the lender's consent and any associated fees. 7. Default and Remedies: The agreement includes provisions related to defaults, remedies, and dispute resolution, including the potential consequences for non-compliance by either party. It is important to note that there might be different variations or customized versions of the California General Form of Agreement of Sale of Residential Property with Assumption of Existing Mortgage or Deed of Trust, developed by individual real estate agencies or legal professionals. These versions may include additional clauses or modify the existing ones to suit specific needs or preferences. It is crucial for both buyers and sellers to carefully review and understand the terms before signing the agreement.
