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Old Jul 21st 2009, 11:28 pm   #1
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Default "Assuming/taking over" a mortgage in Canada

Hi

Just after some advice/pointers from you guys out there in the know

We are currently renting a property with first refusal to buy prior to the lease ending next June.

The owners have advised us that the mortgage on the property is one that can be taken over/assumed.

Can anyone provide some info on how this works in practice? I assume their mortgage lender would have to assess us for the mortgage like another bank would?? Also we have already managed to build a good relationship with our bank and may prefer to go through them, although it will come down to cost I suppose.

Also, if we were to buy direct from the owner we would still want some form of legal type representation for us , even if we pay out of our own pockets along with full assessment/survey of the property.

Any pointers on this type of arrangement/situation would be greatly appreciated, we are not looking at buying now, prob once we get through the winter, but would be great to get some info now

Thanks
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Old Jul 21st 2009, 11:45 pm   #2
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Default Re: "Assuming/taking over" a mortgage in Canada

Assuming a mortgage lets the seller out of any penalties for paying off the mortgage early. Helps them more than you. It can be useful if the terms are better than you can get now, such as lower interest rate.
Get prof. advice.
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Old Jul 21st 2009, 11:48 pm   #3
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Default Re: "Assuming/taking over" a mortgage in Canada

Quote:
Originally Posted by nikki dreaming View Post
Hi

Just after some advice/pointers from you guys out there in the know

We are currently renting a property with first refusal to buy prior to the lease ending next June.

The owners have advised us that the mortgage on the property is one that can be taken over/assumed.

Can anyone provide some info on how this works in practice? I assume their mortgage lender would have to assess us for the mortgage like another bank would?? Also we have already managed to build a good relationship with our bank and may prefer to go through them, although it will come down to cost I suppose.

Also, if we were to buy direct from the owner we would still want some form of legal type representation for us , even if we pay out of our own pockets along with full assessment/survey of the property.

Any pointers on this type of arrangement/situation would be greatly appreciated, we are not looking at buying now, prob once we get through the winter, but would be great to get some info now

Thanks
Not sure how assuming a mortgage works, but forget going to your bank - get a quote form a couple of mortgage brokers to weigh up price.

You'll need a lawyer to do the closing docs and title work anyway so I'd imagine for a bit extra can get the contract done also.
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Old Jul 22nd 2009, 12:14 am   #4
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Default Re: "Assuming/taking over" a mortgage in Canada

Is there a difference between the price you are buying the home for and the remaining balance on the mortgage you are assuming? if so you will need to come up with that difference.
Ex) if you are buying a house for 100,000 and the mortgage is 50,000 then you need to come up with the other 50,000 to complete the sale.

Another thing to consider is what the terms are on the existing mortgage as you can most likely get a better rate today than what the sellers got a couple of years ago. Also beware when/if dealing with a broker as there are many different options available that some brokers don't seem to know about or don't seem to discuss such as a home equity line of credit or a cashback mortgage. In my experience brokers seem to really push a 5 year fixed rate which may or may not be the best thing given your own unique circumstances. In other words, there is no one size fits all mortgage and it should be designed for the individual. A mortgage is not the same as a car loan. Good luck.

Last edited by Lord Vader; Jul 22nd 2009 at 12:19 am.
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Old Jul 22nd 2009, 1:00 am   #5
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Default Re: "Assuming/taking over" a mortgage in Canada

Its good to assume a mortgage if the rate is better than you can get now, both you and the seller benefit win - win

If you can get a better rate elseware then do so, you don't have to assume the mortgage.
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Old Jul 22nd 2009, 1:41 am   #6
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Default Re: "Assuming/taking over" a mortgage in Canada

Thanks for all the replies, really helpful

As you all say, chances are we could probably get a better rate now than what is currently on the mortgage, but we will check and go from there, not looking to buy for a while yet so who knows what may happen!

Cheers all
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Old Jul 22nd 2009, 4:01 am   #7
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Default Re: "Assuming/taking over" a mortgage in Canada

When assuming a mortgage the lending bank does not require to be involved because the vendor is still on the hook for any defaults. If the vendor requests the bank to be let out of the responsibility then the bank would want to qualify the buyer. As OP pointed out the buyer would require to have the difference in cash between value and mortgage balance.
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Old Jul 23rd 2009, 4:54 pm   #8
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Default Re: "Assuming/taking over" a mortgage in Canada

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Originally Posted by Rob_999 View Post
forget going to your bank - get a quote form a couple of mortgage brokers to weigh up price.
My personal experience is very different. We tried a couple of brokers who called around and said that they couldn't get us a mortgage because we had immigrated within the last six months. It seems that the banks are much more flexible if approached direct - we have a mortgage from HSBC, with whom we bank.
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Old Jul 23rd 2009, 5:17 pm   #9
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Default Re: "Assuming/taking over" a mortgage in Canada

We bought our first house in Canada by assuming the payments on a mortgage held by the vendor. That worked for us as we had no credit rating but we did have 1/3 of the price in cash. In this case I would do nothing until after a winter in the house.
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Old Jul 23rd 2009, 5:25 pm   #10
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Default Re: "Assuming/taking over" a mortgage in Canada

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Originally Posted by danfolkestone View Post
My personal experience is very different. We tried a couple of brokers who called around and said that they couldn't get us a mortgage because we had immigrated within the last six months. It seems that the banks are much more flexible if approached direct - we have a mortgage from HSBC, with whom we bank.
Well I walked in to TD and got quoted X%. Called a broker and they quoted 0.75% lower for the exact same mortgage with TD. So I went with the broker, who no doubt gets paid an acquisition fee from TD. Crazy system but thats how it works - cutting out the middle man is not the way to do business with the banks.....
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Old Jul 23rd 2009, 5:43 pm   #11
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Default Re: "Assuming/taking over" a mortgage in Canada

We got our first home this way - we had just landed, had no job, and no income. We assumed the owners mortgage and saved them from impending foreclosure. The kicker was the interest rate of 13%, but it did get our credit record off to a flying start, so worth it in the long run.

There was more risk for the seller, if we defaulted the bank would have gone after them. I think the rules have changed now though, and most institutions seem to request that the buyer meets qualification criteria.

I also was led to believe that the only province in which one can assume a mortgage was Alberta? Has this changed, too, or is it not true at all?
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Old Jul 23rd 2009, 6:00 pm   #12
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Default Re: "Assuming/taking over" a mortgage in Canada

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I also was led to believe that the only province in which one can assume a mortgage was Alberta? Has this changed, too, or is it not true at all?
You can certainly do it in BC.
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Old Jul 23rd 2009, 6:02 pm   #13
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Default Re: "Assuming/taking over" a mortgage in Canada

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I also was led to believe that the only province in which one can assume a mortgage was Alberta? Has this changed, too, or is it not true at all?
Alberta is the only Province where it is possible to assume a mortgage without qualifying. In addition all mortgages in Alberta are assumable.
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Old Jul 23rd 2009, 6:08 pm   #14
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Default Re: "Assuming/taking over" a mortgage in Canada

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Alberta is the only Province where it is possible to assume a mortgage without qualifying. In addition all mortgages in Alberta are assumable.
I beg to differ. It is quite common in Ontario. The banks will always retain the right to qualify purchasers but do not always exercise.
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Old Jul 23rd 2009, 6:09 pm   #15
 
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Default Re: "Assuming/taking over" a mortgage in Canada

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Originally Posted by Almost Canadian View Post
Alberta is the only Province where it is possible to assume a mortgage without qualifying. In addition all mortgages in Alberta are assumable.
That maybe but it is not advisable to let someone assume your mortgage.

If they default the lender can still come after you.

I had a fellow and his real estate agent try to get me to renegotiate my mortgage on our last home so he could give me a smaller down payment and assume the balance.
Because he (and he did admit this to me) couldn't qualify for a mortgage. Needless to say I threw them both out.
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