ASSUMABLE MORTGAGE Meaning and
Definition
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An assumable mortgage refers to a type of mortgage loan that allows a new purchaser to take over the existing mortgage obligation on a property. In simpler terms, it is a mortgage that can be transferred from the current homeowner to a new buyer.
When a property with an assumable mortgage is sold, the buyer can assume responsibility for making the monthly mortgage payments and taking over the terms and conditions outlined in the original mortgage agreement. This enables the buyer to essentially step into the shoes of the original borrower and continue repaying the borrowed funds. It is important to note that assuming a mortgage does not result in creating a brand-new loan. Instead, the new buyer merely assumes the original obligations of the mortgage without needing to go through an application process to obtain a new loan.
Assumable mortgages can be advantageous to both buyers and sellers. For buyers, assuming a mortgage may be an attractive option if the interest rate on the existing loan is lower than current market rates. Assuming the mortgage also saves the buyer the costs associated with obtaining a new loan, such as mortgage application fees and closing costs. For sellers, an assumable mortgage can make the property more appealing to potential buyers, as it simplifies the financing process and expands the pool of potential buyers who may not have otherwise qualified for a new loan.
In summary, an assumable mortgage is a mortgage loan that can be transferred from the original borrower to a new buyer when a property is sold. It allows the new purchaser to assume the existing mortgage obligation, including making monthly payments, while avoiding the need for a new loan application.
Etymology of ASSUMABLE MORTGAGE
The word "assumable mortgage" is a term used in the field of finance and real estate, particularly in the context of home loans. Let's break down the etymology of this term:
1. Assumable: The term "assumable" comes from the verb "assume", which means to take on, adopt, or take over something (such as a responsibility, duty, or debt) that originally belonged to someone else. The word "assume" originated from the Latin word "assumere", which is a combination of the prefix "ad-" meaning "to" or "towards", and "sumere" meaning "to take or take up". Over time, "assume" developed the specific meaning of taking over a debt or obligation, leading to the concept of an "assumable mortgage".
