Let's look at an imaginary Calgarian, we'll call him Ralph. Ralph works as oil rig worker just outside of Calgary. He has lots of cash, but no credit; he's never even had a credit card. When it comes to getting a house, what will happen? Every bank in Calgary will likely turn Ralph down for a mortgage because he has no credit record.
An assumable mortgage can provide Ralph with a mortgage without needing a credit history. As long as Ralph pays the down payment, he can become a Calgary homeowner. The mortgage responsibility , and the monthly payment, transfers to Ralph. With no bank involved, Ralph doesn't need to be approved. He simply takes over (or assumes) the previous owners mortgage.
Assumption can be a great option for people like Ralph who have low, or no, credit. It is also a great option when you can't prove your earnings or have gone through bankruptcy.
Better Interest Rates
Another benefit of assumable mortgages is the interest rate. If a person has poor credit, they will have to pay a higher interest rate. They refinancing mortgage also have to pay high interest rates if the market conditions are poor.
But if they assume a mortgage, they get the interest rate that the previous home owner got. If market conditions were better or the previous owner had good credit, the interest rate will likely be lower than what is currently available.
Fewer Fees
There is also a big benefit to the person transferring the mortgage. Since it the mortgage isn't going to be closed and paid off, there won't be any early payment fees. For the buyer, the assuming saves money on regular mortgage costs like Canadian Mortgage and Housing fees and appraisal fees.
You may run into an mortgage refinancing Fee from the lender, which covers the paperwork that updates the mortgage documents. Expect your Assumption Fee to be anywhere from $150 - $500.
Mortgage Calgary offers news and information on reverse mortgages for Canadians.
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