What is a Mortgage Assumption Agreement Review?
A mortgage assumption agreement is a legal contract enabling a buyer to take over an existing home loan balance from the seller or original borrower.
This transfer must be clearly stipulated to prevent confusion and costly disputes between parties, especially since the lender who holds the original mortgage has to approve the new borrower and arrangement.
Read the rest of this article to explore key terms to review in a mortgage assumption agreement, how to review the entire document for accuracy, and why you should consider hiring a lawyer to review it for you.
What are Key Terms to Review in a Mortgage Assumption Agreement?
A mortgage assumption agreement usually contains the following core components:
- Parties. All parties (the seller, buyer, and lender) must be clearly defined for accountability.
- Assumption of obligations. Check that the agreement states that the buyer is taking over responsibility for the loan’s remaining debt.
- Release of liability. It should be clear if the seller releases future financial obligations or is liable should the buyer default on the mortgage.
- Remaining loan terms. All the mortgage loan terms must be defined, such as the inherited interest rate, to prevent confusion.
- Fees. Any additional fees, such as admin costs, must be outlined.
- Representations and warranties. This section should state that the loan is not in default.
What are Tips for Reviewing a Mortgage Assumption Agreement?
A mortgage assumption agreement review requires careful attention to detail. Here are some things to consider.
Think About Lender Consent
The lender consent section states that the lender approves of the property title transfer and the loan assumption. It should prohibit future transfers without more lender consent being required. This section ensures that the transaction is legally valid.
Explore the Buyer’s Commitment
Check the agreement for clarity about what the buyer agrees to, which is taking over all the original borrower’s responsibilities. These include the loan’s principal, interest, and expenses. They will also have to comply with all terms found in other mortgage documents.
Check Representations
While representations mentioned in the agreement should provide assurances that the buyer can legally enter into the agreement, you should flag any representations that feel generic and don’t apply to your specific situation. You can then discuss making adjustments to them with the other party.
Refer to Loan Documents
When reviewing your mortgage assumption agreement, you should check other loan documents so that all obligations are clearly defined and the agreement is aligned with them.
Consider Agreement Amendments
If there are any changes to the loan terms, such as if the interest rate is adjusted, these must be explained clearly. Buyers can and should negotiate any modifications with the lender for more favorable terms.
Look at Conditions Precedent
There might be conditions that the buyer has to meet before lenders approve the mortgage assumption, such as providing financial statements to show they can pay off the loan. As a buyer, if you’re unsure of what’s required, check with your lender.
Do You Need a Legal Review of Your Mortgage Assumption Agreement?
Since a mortgage assumption agreement can result in significant financial or legal consequences, it’s worth hiring a lawyer to help you with a review of the document.
A lawyer will:
- Check all the assumed loan terms, such as by confirming the balance owing and payment schedules, for clarity.
- Review the borrower’s liability to determine exactly what debt the new borrower is taking on.
- Verifying lender consent to ensure the assumption agreement is authorized and meets all required conditions.
- Clarify if the original borrower is released from all liability or is still responsible for the loan.
- Review what constitutes a default and what remedies the lender can use.
- Identify all additional fees, such as assumption and legal fees, as well as closing costs. This provides transparency for all parties involved.
- Consider if further consent is required if the loan is transferred again in future, to protect your interests.
- Flag any ambiguous wording in the agreement and make changes to it to establish a stronger, clearer final draft.
- Keep the assumption agreement consistent with the underlying mortgage. This prevents the mortgage assumption agreement from clashing with the original loan documents.
Where to Find and Hire a Lawyer to Review Your Mortgage Assumption Agreement
If you’d like to hire a lawyer to review your mortgage assumption agreement, you might be unsure of where to find one. You don’t have to call traditional law firms in your area. Instead, you can make use of an online legal marketplace that connects you to a range of experienced lawyers.
On ContractsCounsel, one of the largest online legal marketplaces, you can gain access to a curated network of vetted lawyers who are ready to assist you with a contract review.
Here are the easy steps to follow when requesting that a lawyer on the platform reviews your mortgage assumption agreement:
- Start by going to the ContractsCounsel marketplace, where it’s free to post your request or project.
- Include details about what you require so you can connect with suitable lawyers. This can include mentioning any specific sections in the agreement that you’re concerned about.
- Receive lawyer bids. Lawyers directly on the platform will send you multiple bids on the project.
- Review the lawyers’ information. Take time to go through the platform’s extensive lawyer information, such as where they’re based, their level of experience, their field of expertise, and client ratings for previously completed projects on the platform.
- After reviewing the lawyer data, select a lawyer to hire. They’ll review your mortgage assumption agreement for a flat fee.
