A cosigner on a mortgage loan is almost always also a owner on the property. Most mortgage lenders will not make a mortgage loan to two borrowers if only one has a vested interest on the property deed. This is an essential piece of information because the practice of "assuming a mortgage" is generally executed between a new home buyer and an existing homeowner with a mortgage. However, if managed correctly, it is still possible for a cosigner to take over a mortgage loan.
Traditional Mortgage Assumption
The practice of assuming a mortgage is appealing to some new homeowners if the seller's current mortgage is reasonable and affordable. In this scenario, a new home buyer reaches out to the existing mortgage company -- before a home is purchased -- and asks to "assume" the seller's current mortgage. In most cases, the new buyer's credit and income need to be evaluated regardless to ensure that repayment on the existing mortgage will continue without problems.
The main advantage of assuming a mortgage is the maintenance of an attractive rate and payment on an existing mortgage. However, a secondary benefit is the avoidance of costly closing fees and mortgage points. In many cases, a successful mortgage assumption can save you enormously at closing. However, this is all provided that you, as the new buyer, will qualify for the existing mortgage. This is not a guarantee and could take as long to process as a traditional mortgage application.
It is possible for a cosigner on an existing mortgage to assume the mortgage independent of the other mortgage signer. However, this can be tricky. In this instance, the cosigner assuming the mortgage is literally purchasing the home from the other party. If the party who wishes to be removed from the mortgage loan wants to remain on the ownership deed, a mortgage assumption will likely be unsuccessful, and the cosigner who wishes to take over the mortgage will need to find a traditional refinance.
While assuming mortgages was popular in the 1970s and 1980s, when mortgage rates were skyrocketing, the practice has fallen into relative disuse. However, there are some types of mortgages that are still assumable. These are generally confined to loans insured by the Federal Housing Authority and the Department of Veterans Affairs. If you have an FHA- or VA-insured mortgage, it might be possible for your cosigner to assume your home loan.
Based in Eugene, Ore., Duncan Jenkins has been writing finance-related articles since 2008. His specialties include personal finance advice, mortgage/equity loans and credit management. Jenkins obtained his bachelor's degree in English from Clark University.