Assumption of Mortgage- Is it any good?

Disposal of Acquired Assets is extended up to September 30, 2008, I will do my best to update you on the available listing, as the Acquired Assets Unit temporarily suspended the addition of new appraised units in the inventory, until further notice.

On another note, allow me to elaborate more on the issue of ‘Assumption (of Mortgage)’.

Is assumption of mortgage safe? I’d say it is risky but may be beneficial.

Assumption of mortgage simply means:

1. Executing a ‘Deed of Sale with Assumption of Mortgage’ or ‘Deed of Sale’ or any document synonymous to that, and a 'Special Power of Attorney'.
2. Updating and amortizing the loan balance (using the original borrower’s name) until fully paid;
3. Paying the necessary taxes under the original borrower’s name;
4. Transferring the title & other pertinent records into the successor-in-interest's name

Assumption of Mortgage has its good and bad sides, risks and benefits. Hereunder are the common issues you should know:

Disadvantages:

1. The buyer may shell out a big amount of money to consummate the sale, only to find out (after the cash outlay) the housing loan account is either (a) delinquent, (b) subject for foreclosure, (c) foreclosed, or worse, (d) acquired [back] by Pag-IBIG;

2. Since there is a mandatory insurance coverage, the Mortgage Redemption Insurance (MRI) or Sales Redemption Insurance (SRI) only applies to the principal borrower.

If the original borrower dies and the successor-in-interest has no knowledge of such death, the successor-in-interest will continue to amortize as if the borrower never died. If the successor-in-interest has knowledge of the original borrower’s death, he/ she must be able to present proof.

On the other hand, should the successor-in-interest die, considering the latter is not insured, the same cannot claim for the said insurance benefit, thus, the successor-in-interest will have to amortize continuously until the loan is fully paid;

3. If the original borrower’s account has arrearages, the successor-in-interest is bound to update the housing loan account and pay all penalties accrued thereto to avoid foreclosure;

4. The original borrower may not be able to apply for a Multi-Purpose Loan (MPL) or file for withdrawal of savings with Pag-IBIG, if the successor-in-interest defaults in amortizing the monthly payments;

5. Pag-IBIG may offset a fraction of the member-borrower’s savings (Total Accumulated Value) to the arrearages (as a result of the borrower’s failure to update);

6. The original borrower will not enjoy the Second Availment feature of the housing loan program (supposing the loan is still active).

7. Previously approved housing loan accounts (taken-out prior to November 2006) have a higher interest rate, thus, higher monthly amortization. Unless, the one subject for assumption has been taken-out November 2006 (and after);

8. If the housing loan is due for full payment, or is subject for restructuring, the successor-in-interest is required update/ pay for the original borrower’s lacking months (in terms of membership contribution)

Advantages:

1. New housing units are situated in far areas of the north or south area of Davao (or even outside), therefore, assuming old units are better than buying new ones;

2. Old housing units are bigger in lot sizes (100sqm and above) than the new ones (less than 100sqm);

3. Some old units have already been improved, thus, little is needed or none at all;

4. The successor-in-interest may apply for a Housing Loan to buy the mortgaged property with Pag-IBIG;

5. Even though the successor-in-interest is still amortizing the assumed property, he/ she may still apply for a new housing loan (bearing a low interest rate).

On matters concerning buying an old house, always consider the following before letting go of your hard earned money:

1. Inquire if the property is mortgaged;
2. If yes, ask where;
3. If yes, ask for an latest/ updated statement of account;
4. If yes and under Pag-IBIG, you may acquire it in cash (if you have the means) or apply for a housing loan [Purchase of Residential Unit (PRU)]

For particulars, call us up.