BUYER Realty Services
Qualifying Assumable Example:

  • Joe wants to sell his Calgary home for $395,000 and has a $385,000 mortgage at 1.5% interest. Mark wants to buy Joe’s house. Mark only has to put down $10,000 (plus closing fees) to take over Joe’s house and mortgage. Alberta regulations allow for Mark to take over the mortgage in most instances (assuming Mark qualifies & the seller and seller's bank agree)

The example above is a low-down, qualifying assumable with a low interest rate. Other examples of assumables sometimes ask for significant "Cash To Mortgage" amounts (eg. 35% of the sale price). On a $400,000 home, it isn't surprising to see sellers asking for $100,000 or $150,000 down.

Assumable mortgages are increasingly rare nowadays but it's where a homeowner with an assumable loan can "hand off" the loan to a buyer instead of paying it off using proceeds from the home sale. This is of benefit to some homeowners who may be facing hefty penalties or closing costs if they try to pay off their mortgage early. If rates are low and you can get your choice of property by assuming the existing mortgage, by all means do so.

  • Pro: Reduces monthly payments and saves money on closing costs.

Assumable Mortgages

Assumable Mortgage: A loan that allows a home buyer to take over a seller’s mortgage when purchasing a home.

UPDATE: There were some big changes in 2008 and 2009 to Alberta's assumable mortgages. Most banks have closed the door on being able to assume a mortgage without qualifying. Depending on the bank, you typically have to qualify (i.e. have good credit, have verifiable income etc.) if you wish to assume someone else's mortgage.