Real Estate

Still possible to assume a mortgage in Canada?

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  • Sep 12th, 2019 11:59 pm
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[OP]
Member
Sep 17, 2016
308 posts
109 upvotes

Still possible to assume a mortgage in Canada?

As the title says: is it still possible to assume a mortgage in Canada? More specifically Alberta but any province will do ...
15 replies
Deal Guru
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Mar 23, 2008
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Edmonton
TitusBobby wrote: As the title says: is it still possible to assume a mortgage in Canada? More specifically Alberta but any province will do ...
Can you share the secret of what you're hoping to accomplish by assuming someone's mortgage? You might get more useful advice with that. There's often multiple ways to skin a banana (trying to be politically correct here...)

C
[OP]
Member
Sep 17, 2016
308 posts
109 upvotes
CNeufeld wrote: Can you share the secret of what you're hoping to accomplish by assuming someone's mortgage? You might get more useful advice with that. There's often multiple ways to skin a banana (trying to be politically correct here...)

C
Hoping to get a house at a good price while saving someone from defaulting on a mortgage and ruining their credit score
Deal Guru
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Mar 23, 2008
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TitusBobby wrote: Hoping to get a house at a good price while saving someone from defaulting on a mortgage and ruining their credit score
Why couldn’t someone just sell their house normally at regular price instead of giving you a deal to assume their mortgage? I guess the bonus is not getting hit by a mortgage cancellation penalty, but most people need a new home, so they’d be looking to port it over.

I’m not trying to be an ass or anything. But in the past, assumable mortgages were a bonus because if you got a great rate on your mortgage when you bought your house, it would be a selling point to have it assumable by the next buyer. Mortgage rates haven’t been fluctuating enough (AFAIK) to really make much of a difference, so most people would just try to negotiate their own.

Basically, I think your target seller is going to be pretty rare. But I could very well be wrong.

The one thing I did note is that the original seller can be held responsible for any shortcomings if the buyer defaults on the mortgage. In areas where property values are increasing, that’s not much of a concern. But in areas where property values are stagnant or even falling, that can be a risk that smart sellers would avoid.
https://www.darrenrobinson.ca/mortgage- ... mortgages/

C
[OP]
Member
Sep 17, 2016
308 posts
109 upvotes
CNeufeld wrote: Why couldn’t someone just sell their house normally at regular price instead of giving you a deal to assume their mortgage? I guess the bonus is not getting hit by a mortgage cancellation penalty, but most people need a new home, so they’d be looking to port it over.

I’m not trying to be an ass or anything. But in the past, assumable mortgages were a bonus because if you got a great rate on your mortgage when you bought your house, it would be a selling point to have it assumable by the next buyer. Mortgage rates haven’t been fluctuating enough (AFAIK) to really make much of a difference, so most people would just try to negotiate their own.

Basically, I think your target seller is going to be pretty rare. But I could very well be wrong.

The one thing I did note is that the original seller can be held responsible for any shortcomings if the buyer defaults on the mortgage. In areas where property values are increasing, that’s not much of a concern. But in areas where property values are stagnant or even falling, that can be a risk that smart sellers would avoid.
https://www.darrenrobinson.ca/mortgage- ... mortgages/

C
They wouldn't qualify for a new mortgage because the seller lost their job. This is in a market where house prices have gone down a lot in the past few years, so if they sold their house, they still would be on the hook even if they used the proceeds of the sale to pay off the balance owing.

Basically I'm looking at ways to structure this where they get to walk away with their credit score unharmed and with more money in their pocket than if they got foreclosed while I make a little profit for my risk
Deal Guru
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Mar 23, 2008
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Edmonton
TitusBobby wrote: They wouldn't qualify for a new mortgage because the seller lost their job. This is in a market where house prices have gone down a lot in the past few years, so if they sold their house, they still would be on the hook even if they used the proceeds of the sale to pay off the balance owing.

Basically I'm looking at ways to structure this where they get to walk away with their credit score unharmed and with more money in their pocket than if they got foreclosed while I make a little profit for my risk
I'm confused over the scenario you present. If the value of their house is less than their mortgage amount, the chances the lender will approve you assuming the mortgage is pretty limited. And why would you assume a mortgage for more than the house was worth anyways?

But one of the key problems (for them) is that if you buy the house and assume their mortgage, they are STILL on the hook for it if you turn around and walk away from the mortgage. And they would have no control over the situation.

Again, not trying to be an ass about it. Just asking questions and making observations.

C
Deal Fanatic
Apr 5, 2016
5420 posts
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Calgary/Vancouver
Speaking for BMO, you can assume a mortgage with them except for in BC. You can do it as purchasers too. Your lawyer/notary will submit assumption request and once approved, a release of convenant will be issued. AFAIK, there is no appraisal done so LTV don't come into play. If it's default insured, they may request an appraisal and depending on the value you may need to put more funds.
Deal Fanatic
Apr 5, 2016
5420 posts
3861 upvotes
Calgary/Vancouver
CNeufeld wrote: I'm confused over the scenario you present. If the value of their house is less than their mortgage amount, the chances the lender will approve you assuming the mortgage is pretty limited. And why would you assume a mortgage for more than the house was worth anyways?

But one of the key problems (for them) is that if you buy the house and assume their mortgage, they are STILL on the hook for it if you turn around and walk away from the mortgage. And they would have no control over the situation.

Again, not trying to be an ass about it. Just asking questions and making observations.

C
I don't see why the sellers are on the hook as if they did a complete assumption of the mortgage. Their names will be removed as borrowers from the mortgage and their names removed off title. Only way this happens is if they added the buyers name and kept the sellers name but this is never advised and only happens if say a family member was taking over and needed help with income.
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Mar 23, 2008
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bomber17 wrote: I don't see why the sellers are on the hook as if they did a complete assumption of the mortgage. Their names will be removed as borrowers from the mortgage and their names removed off title. Only way this happens is if they added the buyers name and kept the sellers name but this is never advised and only happens if say a family member was taking over and needed help with income.
I don’t see what it should be that way either, aside from the fact that the lenders like to keep their options open for collecting as much as possible. But if you google “assumed mortgage seller responsible”, you’ll find numerous links, including lawyer’s pages, RateHub, and various mortgage brokers’ sites.

Edit to update... RateHub says you’re only on the hook if the buyer defaults before 12 months are up. After that, the buyer is in their own.

C
Deal Addict
Jan 13, 2014
1776 posts
714 upvotes
Calgary
Mortgage assumptions are a headache anyways and in your case the seller wont walk away with cash. your best option would be to just do a simple private sale from one party to another and this way the sellers get some cash as well and you go through the process of putting down money etc.
Deal Guru
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Mar 23, 2008
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TitusBobby wrote: Would a wrap-around mortgage be a viable option in Canada?

Wrap-around mortgages - legal in Canada?

https://forums.redflagdeals.com/wrap-ar ... a-2309818/
So now you want to pay your money to a jobless buyer whose on the verge of being foreclosed upon, and you’ll count on that seller to forward your payment to the lender? And if they stop doing that, they’re no worse off than they were before, but you’re out all the money that you thought was being applied on your loan... All the while paying private lender interest rates, because no A or B lender would touch this with a 10 meter pole.

Sign me up! How can that possibly go wrong?

Why not spend more time looking for an undervalued property that needs some TLC bump up its value rather than some kind of snake oil loan? Thinking outside the box can be a good thing, but there’s sometimes a reason for the box to exist.

C
Newbie
Sep 5, 2019
12 posts
2 upvotes
They could possibly refinance and have you on title to prevent the foreclosure. There are ways to avoid foreclosure.
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Jul 2, 2018
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There is a way to pull something similar off and it's common on the American side of the border, but it's a bit more complicated in Canada. Your average "investor" who buys pre-construction condos and adds real estate investor to their instagram profile probably won't be able to help you, but goto a networking event in your area and there will be people who will provide you with all the details and a good lawyer who can put together the deal for you.
There is a great deal of risk involved in doing this so consult with a lawyer who bas experience in putting these types of deals together.

Also make sure to assess whether the current home owner is going to go belly up anytime soon.
Realtor + Investor
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Jul 20, 2016
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We actually assumed a mortgage last year. It was a very specific situation where the seller had to move a year into their mortgage and weren't willing to negotiate down further on the house price because they were going to have to take a big penalty to break their mortgage. Our realtor proposed the assumption, as their mortgage rate was better than what we would have gotten at the time, and they dropped the price and it was all good.

It was a pain in the ass to go through the banking and everything, TD did an awful job of whatever they had to do, but now everything is fine. I think it works in specific situations but for most it isn't worth going through it
Newbie
Oct 26, 2019
1 posts
If anybody's still wondering, Canada has now launched this First Time Home Buyer Incentive Program. This seems to be a great deal of help for people who qualify. Some thing written by a mortgage broker in Barrie.

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