Many Sellers believe that allowing and marketing for Buyers to assume their mortgage will increase the chances of their home being sold. The problem with this theory is that it takes money to buy and money must come from somewhere. Below are my Top 5 Risks to Consider if Allowing your Mortgage to be Assumed:
(1). Banks often require that high-ratio mortgages have Seller accept personal liability for default.
(2). Banks often refuse to allow Buyers to assume the mortgage (e.g. due to bad credit rating or other risks).
(3). Assumable mortgage deals must be conditional upon lender acceptance of the Buyer.
(4). Assumable mortgage indicates a sign of Seller desperation (i.e. particularly if there is a large mortgage on title) that attracts low-ball offers from investors and buyers without money and / or ability to secure financing.
(5). Is saving a little money on the payout penalty worth your additional time, effort, and personal risk expended to get your mortgage assumed?
In summary, you should not disrupt a REALTOR’S® marketing of a home by offering assumption of mortgage since the potential increase in low-yield Buyers is in most cases not worth the risks of an assumed mortgage combined with 'complicated listing advertising' that can potentially confuse Buyers who may not understand that the assumed mortgage is only voluntary. Plus with interest rates often at competitive levels Buyers can usually get a lower rate from their mortgage broker so with no obvious benefit to the Buyer, the Seller’s assumable mortgage will very often be rejected.
[Article written and ©2009 by Kelly Grant, M.Eng., ABR, NCSO, P.Eng. - REALTOR® at Maxwell Devonshire Realty in Edmonton, AB]
Disclaimer: for those readers not currently represented by another licensed REALTOR®, to obtain more information on this topic and / or if you are serious about selling or buying in the Greater Edmonton Area, call Kelly at 780-414-6100 (pager) or send Kelly an email to SOLD@KellyGrant.ca to schedule a confidential appointment.