Years ago the policy was (if you had bad credit) and you wanted to buy a home, you would just assume a mortgage.
This theory worked for a long time but the theory is a little too simple. Basically the banks figured out that
they were financing anybody and everybody every time they allowed their mortgages to be assumable. Because -
unless you were assuming the mortgage for it’s low rates – the only ones who did assume mortgages would be those
who couldn’t qualify with that bank (note: if you are having trouble qualifying with a bank – try and talk to
Calgary mortgage brokers.)
Now, there is nothing wrong with having bad credit or getting a loan if you have bad credit (just as long as the
lending is aware of your situation and if you make your payments). The problem is that most people who assumed
mortgages DID NOT make their payments. The banks respond to this by saying that the person(s) who originally
borrowed the money would be responsible even after the assumption took place – so if the person who assumed
the mortgage stopped making their payments, the responsibility fell back on the original borrower.
Furthermore, the banks then began inserting a clause into their mortgages that is called the “due on sale” clause, but
for political purposes they still left in the “assumable” clause but changed it to read “assumable upon qualification”,
so now you could assume a mortgage but as soon as the sale went through the banks would then say that the money they
lent was due immediately unless the new borrower qualified with them. And that is the way it is today!
So now the only reason to assume a mortgage is for low rates because if you can’t qualify – you can’t assume (and
even if you do qualify the original borrower is still liable if the new borrower doesn’t make their payments – so it
is highly unlikely that you will find a seller who will allow you to assume their mortgage (regardless of if you
do qualify or not).
The moral of the story: Just qualify for your own mortgage. Or consult Calgary mortgage brokers for some free advice.
This article was written by Trevor Hickey, B.A. who is a Mortgage Associate in Calgary, Alberta, Canada.
Trevor Hickey, B.A.
Concord Mortgage Group Ltd.
#107 – 1905 Centre Street NW
Bus: (403) 290-1990
Cell: (403) 860-8738
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