Finance
In Hawaii, what is a 'loan assumption' compared to 'buying subject to' an existing mortgage?
AA. Both require lender approval and release the seller from liability
BB. In a loan assumption, the buyer takes personal liability for the loan with lender approval; in subject-to, the buyer takes title but the mortgage stays in the seller's name without lender approval✓ Correct
CC. They are legally identical in Hawaii
DD. Subject-to transactions are illegal in Hawaii
Explanation
Assumption requires lender approval and typically releases the seller from personal liability. Subject-to takes title with the existing mortgage in place without lender knowledge or formal assumption.
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Key Terms to Know
Loan-to-Value Ratio (LTV)
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
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