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 Minnesota General Form of Agreement of Sale of Residential Property with Assumption of Existing Mortgage or Deed of Trust is a legal document used in real estate transactions in the state of Minnesota. This agreement outlines the terms and conditions of the sale of a residential property where the buyer assumes the existing mortgage or deed of trust on the property. The agreement begins with the identification of the parties involved, including the names and addresses of the buyer and seller. It also includes a detailed description of the property being sold, including its address and legal description. One of the key elements of this agreement is the assumption of the existing mortgage or deed of trust. The agreement specifies the amount of the mortgage, the interest rate, and the remaining balance. It also outlines whether the buyer will assume the mortgage "subject to" or "with assumption of liability." These terms determine the extent to which the buyer will be responsible for the mortgage payments and any default on the loan. The agreement also includes provisions for the purchase price, earnest money deposit, and financing arrangements, if applicable. It outlines the timeline for the closing of the transaction and provides details on any inspections, repairs, or contingencies that need to be completed before the closing. Furthermore, the agreement may include additional clauses and provisions specific to the transaction. These may cover items such as the allocation of closing costs, the handling of prorated taxes and utility bills, and the transfer of any warranties or guarantees associated with the property. While the Minnesota General Form of Agreement of Sale of Residential Property with Assumption of Existing Mortgage or Deed of Trust encompasses most residential property transactions involving existing mortgages, it is important to note that there may be variations or specialized forms for specific types of properties or situations. For example, there may be separate forms for condominiums, townhouses, or properties subject to homeowner association regulations. It is crucial for all parties involved in a real estate transaction to carefully review and understand the terms and conditions outlined in the agreement. It is also advisable to consult with a qualified real estate attorney or professional to ensure compliance with Minnesota state laws and to protect their interests throughout the transaction.
