You Can Assume That Non-Assumable Mortgage Loan

Nearly every non-FHA/VA mortgage includes the infamous paragraph seventeen, also known as the “Due on Sale” clause. The wording of this paragraph carries significant implications for homeowners with “non-assumable” mortgages. Here is what you need to know about paragraph seventeen, including how to assume a “non-assumable” mortgage.

If you’re not familiar with the due on sale clause included in most mortgage contracts, here is an excerpt.

“If all or any part of the home or an interest therein is sold or transferred by the borrower without the lender's prior written consent…the lender may, at the lender’s option, declare all the sum secured by the mortgage to be due and immediately payable.”

There is nothing in the infamous paragraph seventeen that prevents you from selling your property without paying off the mortgage loan. This paragraph simply gives the lender the right to call in the loan if you transfer the loan without “Lender’s prior written consent.” Why would a mortgage lender agree to your request to assume an existing mortgage?

• If the seller has fallen behind on their payments and you agree to make the payments current.

• The interest rate on the existing loan equals or exceeds the current market rate. Mortgage lenders dislike “portfolio runoff” of their above market interest rate loans.

• The buyer/seller has a working relationship with the existing lender.

• The buyer/seller agrees to additional business with the existing lender.

There may be other reasons for a mortgage lender to allow the transfer, talk to a loan representative about the details of your situation. Sometimes the mortgage lender will say yes, sometimes they will say no; however, it never hurts to ask. Many homeowners ask the wrong question when contacting the lender; never come out and ask “Is the mortgage assumable.” The answer you will almost always get is “No, there is a Due on Sale” clause. Start by explaining the details of your individual situation and butter your lender up before asking the big question.

You an learn more about your mortgage options, including costly mistakes to avoid by registering for a free, six-part mortgage tutorial.