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Assumability (Mortgage Assumption)

An assumable mortgage can be taken over (assumed) by the buyer of a property when that property is sold.

The buyer must typically apply and qualify for the mortgage in order to assume it. If approved by the lender, the buyer then takes over the mortgage payments and receives the seller’s existing mortgage rate and terms.

Mortgage assumptions have benefits:

  • If the seller’s mortgage has a below-market interest rate, the buyer can save some money
  • If the seller has paid for mortgage default insurance, the buyer may paying insurance premiums again. This is relevant when the new buyer is putting less then 20% down.

If you’re considering assuming a mortgage, make sure that:

  • The mortgage terms, features, and restrictions are to your liking
  • The rate is sufficiently low compared to current alternatives
  • There is enough time remaining on the mortgage to make it worthwhile

These days, most (but not all) lenders offer assumption privileges.

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Last modified: September 26, 2010

Robert McLister is one of Canada’s best-known mortgage experts. A mortgage columnist for The Globe and Mail, interest rate analyst and editor of MortgageLogic.news, Rob has been covering Canada's mortgage market since 2007.