Saturday, June 27, 2009

ways of getting loan for acquiring property

When a buyer acquires a property having an existing mortgage loan, the question of personal liability arises. As long as the buyer does not add his or her signature to the note, the buyer takes on no personal liability, although the property still serves as security for the loan and can be foreclosed in the event of default. In this case the buyer is said to purchase the property "Subject to" the existing loan. The seller remains personally liable for the debt and is said to "stand in study" for the obligation. This means that in case of default, a lender who fails to obtain satisfactions from the current owner or from the property can go 'up the line" to the original borrower. The seller or original borrower may not be comfortable with this contingent liability from the loan. A solution is to have the buyer add this or her signature to the original note, and obtain from the lender a release of liability from the note. in this case the buyer is said to assume the old loan, that is, to assume liability for the note.
An important characteristic of loan is whether or not a subsequent owner of the property can preserve it. This feature is commonly referred to as assumability. As we noted in the discussion of the due-on-sale clause, it is a major distinguishing feature between the broad types of home loans.

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