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Business Definition for: assumable mortgage
Dictionary of Banking Terms
assumable mortgage

mortgage giving the borrower the right to assign the unpaid balance of his obligation, without prepayment penalty, to another person upon sale of the mortgaged property. The buyer assumes payment of the loan at the same rate and terms for the remainder of the mortgage, and the seller remains secondarily liable for the obligation. Department of Veterans Affairs mortgages and mortgages insured by the Federal Housing Administration are generally assumable by the buyer. Contrast with portable mortgage .

See also assumption , due-on-sale clause
Related Terms:
assumption

act of taking on responsibility for the liabilities of another party, usually documented by an assumption agreement. In the case of a mortgage assumption, the seller remains secondarily liable unless released from the obligations by the lender.

due-on-sale clause

clause in a mortgage contract requiring the borrower to pay off the full remaining principal outstanding on a mortgage when the mortgaged property is sold, transferred, or in any way encumbered. Due-on-sale clauses prevent the buyer of the property from assuming the mortgage loan.

Referring Terms:
portable mortgage
alienation clause
assumption
prepayment penalty
transfer of mortgage
Copyright c 2006, 2000, 1997, 1993, 1990 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
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