The Truth About Mortgage Assignments
A mortgage assignment in its original form (also known as an assignment of mortgage) is a legal document that expedites the transfer of a mortgage from the original lender or borrower to a new lender or borrower.
The Big Boys Use The Original Method of Mortgage Assignments Every Day
The most common example of an original Assignment of Mortgage is when a mortgage lender transfers or sells the mortgage to another lender. This can be done more than once until the balance is paid. The lender does not have to inform the borrower that the mortgage is being assigned to another party. The new lender, however, should send the borrower a notification informing them of the sale and making clear the terms of the mortgage payments.
Most lending companies use this mortgage assignment method on a daily basis, to free up money, so they can lend out more money, and make more profit.
Mortgage Assignments in Real Estate Investing
In this article we are going to discuss a mortgage assignment the way it’s done in real estate investing. These transactions occur between a property seller and buyer and it happens when the borrower or homeowner sells the mortgaged property by assigning the existing mortgage to the new buyer.
Most mortgage loans that have originated in recent years have loans that state at the top of their promissory note that they are “not assumable”. However, what most novice real estate investors don’t realize is that this only means that the BANK won’t allow a buyer to assume the loan by traditional methods which include going through a grueling loan approval process. Real estate investors still use the mortgage assignment and subject-to method to assume loans everyday, and it is legal.
Using the mortgage assignment strategy allows the new buyer to accept an assignment of an existing mortgage loan without a formal assumption. When this type of transaction occurs, the buyer becomes the assignee and they take over the monthly payments due to the bank. As long as the buyer continues to pay the mortgage on time the bank is typically not concerned about who is making the payment. If the bank is still making money and the loan is performing, you typically won’t hear a peep from anyone.
Finding the Win-Win with Mortgage Assignments
This exceptional form of seller financing has many benefits to both the buyer and seller.
Benefits to the Buyer
- The buyer is able to purchase a home without having to qualify for traditional financing.
- Buyers who are self-employed or have recently changed employment, or have other defects in their credit history, such as a recent late payment, or recent divorce may be prevented from qualifying for traditional financing.
- The seller has the ability to sell an otherwise hard-to-sell home.
- Mortgage assignment transactions are not complicated, and can be accomplished by homeowners with the help of an experienced investor or attorney. This saves them from paying for realtor costs which saves the seller thousands of dollars in real estate commissions.
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