Finance
An assumable mortgage allows a buyer to:
ATake over the seller's existing mortgage at the original interest rate and terms✓ Correct
BObtain a new mortgage using the seller's credit history
CAutomatically qualify for any mortgage the seller had
DAvoid paying closing costs entirely
Explanation
An assumable mortgage allows the buyer to take over the seller's existing mortgage, including the original interest rate and remaining balance. This can be advantageous when current rates are higher than the seller's original rate.
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Key Terms to Know
Closing Costs
Fees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.
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.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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.
Math Concepts
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