Arguably one of the most expensive purchases a person will ever have to make in their lifetime is the purchase of their home. This usually requires a mortgage which can be taken out from a bank or can be gained from a mortgage provider. This is process that most people will be familiar with, but as there are so many varying types of mortgages, (all with differing advantages and disadvantages), choosing the right one can be confusing.

An assumable mortgage is one of these types that differs from a conventional mortgage. An assumable mortgage will typically allow the buyer of a property, to take over the mortgage that the previous owner was paying towards. For many people this sounds like a great opportunity and there are many key points that need to be analysed before discussing assumable mortgages further.

• Rising interest rates benefit the buyer as the cost of borrowing increases. An individual who obtains this type of mortgage will be able to surpass these increased rates as he/she is continuing a pre existing mortgage.

This is a great advantage of an assumable mortgage, and is the main reason why people often find these so appealing. However, like any mortgage there are some issues that need to be outlined.

• An assumable mortgage can only be provided if the mortgage seller approves.
• An assumable mortgage may require additional financing or a down payment.
• Even though the mortgage is assumed and you are paying the same rate, the mortgage lender can still change the terms and conditions.
• The seller of the previous mortgage may still be made liable for the loan even if the assumption has taken place. However, this can be avoided if the seller releases their liability when the assumption takes place.

So while there is one main advantage of an assumable mortgage there, are a number of drawbacks for both the seller and the buyer. However, it could be argued that the main benefit by far outweighs the negatives, as these issues can easily be addressed.

Despite the various opinions on assumable mortgages, it must be stressed that these can only be acquired with the mortgage providers consent. The option of obtaining an assumable mortgage will depend on individual circumstances associated with a property and so they are never guaranteed. It may be advisable to speak to an estate agent or the mortgage provider for further details.