The Mortgage Loan Assumption Process

Assuming a mortgage loan in a real estate purchase and sale transaction can be an attractive way to preserve favourable financing terms and avoid the cost and uncertainty of obtaining a new loan. However, stepping into an existing mortgage loan involves more than simply taking over payments.

Here are five important matters to be taken into consideration on the seller’s side and the buyer’s side when navigating the assumption process:

1. Ensure full disclosure of documents. Because the buyer will be expected to step into the seller’s shoes as borrower under the loan documents, it is important for the purchase agreement to require the seller to provide full disclosure of all loan and security documents, including the commitment letter, loan agreement and all collateral security documents and registrations.