Taking Over Payments

We are moving out of state, and a friend of the family offered to take over payments. How would we go about doing this?


Assuming a mortgage, also known as taking over mortgage payments, is a direct process. It occurs when a new borrower assumes the existing mortgage of the original borrower. This can happen in various scenarios, such as when homeowners wish to sell their homes, and a potential buyer is interested in assuming the current mortgage instead of acquiring a new one. The process typically involves contacting the lender, confirming the loan's assumability, and drafting a formal agreement to transfer the mortgage responsibility.

Pros of taking over mortgage payments:

1. Potentially favorable interest rate: If the original mortgage has a low interest rate compared to current market rates, assuming the mortgage could be financially beneficial.

2. Lower upfront costs: By taking over an existing mortgage, the buyer can avoid some upfront costs associated with obtaining a new mortgage.

3. Faster process: Assuming a mortgage may involve less paperwork and a quicker closing process compared to obtaining a new mortgage.

Cons of taking over mortgage payments:

1. Qualification requirements: Not all mortgages are assumable, and even if they are, the new borrower still needs to meet the lender's criteria for creditworthiness and financial stability.

2. Liability concerns: If the new borrower assumes the mortgage without securing a new one, the original borrower may still be legally liable for the loan in the event of default by the new borrower. This implies that if the new borrower fails to make the payments, the original borrower could be at risk of damaging their credit score or even losing their home.

3. Limited negotiation: The terms of the existing mortgage, including the interest rate and other conditions, are not negotiable, and the new borrower must accept them as they are. This means that the new borrower cannot negotiate for a lower interest rate or different payment terms.

To start the process of assuming a mortgage, the involved parties should begin by contacting the lender to confirm if the loan is assumable. If it is, the lender will provide the necessary information and requirements for the assumption process. A formal agreement between the original borrower, the new borrower, and the lender must be drafted to transfer the mortgage responsibility legally. For your peace of mind, it's highly recommended to consult a real estate attorney for legal advice and assistance before proceeding with this transaction.

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