Is it OK to assume a non assumable mortgage?


Often lenders protect themselves from assumption of existing mortgage and with a due on sale clause try to make the home loan a non assumable mortgage. This is done with almost all mortgages that are not FHA or VA originated. Non assumable mortgage loans will make assuming the loan a risk, but statistics has shown that sellers and buyers are willing to take it.

If there is a due on sale clause on your agreement, it does not mean you cannot assume or transfer the mortgage obligations, respectively if you are a buyer or a seller. The risk is that the lender may find out and may decide to demand full repayment of the mortgage.

Some lenders won't care about the loan assumption if payments remain regular. Others may choose to call the loan if they find about the assumed mortgage. As a whole, should the lender calls the loan, the buyer will have to refinance quickly or they are facing a foreclosure. Still, have in mind that it is not illegal to assume a mortgage with a due on sale clause. The due on sale feature only declares that if the property is sold without the lender's permission, the loan can be demanded in full immediately. Whether the lender chooses to do so, cannot be foretold.

However, the seller often remains in liability according to the law in some states and will be responsible if the buyer defaults on payments or the lender finds out about the assumption.

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