ASSUMPTION FEE Meaning and
Definition
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An assumption fee is a financial term used to describe a fee that is charged when a mortgage loan is assumed by a new borrower. This fee is typically required by the lender and is levied to cover the administrative costs associated with transferring the existing mortgage to a new borrower.
When a homeowner sells their property and transfers their existing mortgage to the purchaser, the lender incurs certain expenses and administrative tasks to facilitate this transfer. The assumption fee is implemented to compensate the lender for these costs, which include processing paperwork, conducting credit checks, and updating loan documentation.
It is important to note that not all mortgages can be assumed, and even when they can, the new borrower must meet certain eligibility criteria set by the lender. Additionally, assumption fees can vary in amount and are usually stated as a percentage of the loan balance or a flat fee.
The assumption fee is typically paid by the purchaser during the mortgage assumption process. It is important for homebuyers to be aware of this fee and calculate it into their overall costs when considering assuming a mortgage loan.
In summary, an assumption fee is a charge imposed by the lender when a mortgage loan is transferred to a new borrower. It covers the administrative expenses of processing the mortgage assumption, and its amount may differ depending on lender policies or the loan balance.
Common Misspellings for ASSUMPTION FEE
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Etymology of ASSUMPTION FEE
The etymology of the term "assumption fee" can be understood by looking at the origins and meanings of its constituent words.
1. Assumption: The word "assumption" comes from the Latin word "assumptio", which means "a taking or getting". In English, it refers to the act of taking on or accepting something, often used in the context of taking over a responsibility or debt from someone else. In the context of an assumption fee, it typically refers to the fee charged for assuming a financial obligation, such as a mortgage or loan.
2. Fee: The word "fee" has Middle English and Old English roots. It comes from the Old English word "feoh", which means "cattle, property, money". Over time, it evolved to refer to a payment or charge for services rendered.
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