It may be beneficial for a Buyer to assume an existing
mortgage if that mortgage loan was granted at a lower rate of interest
than the interest rates available to a Buyer on mortgage loans at the
time that the Buyer is seeking to Purchase real estate.
Conversely, if a Seller can market an existing mortgage debt which carries
a lower rate of interest than the interest rates available to a Buyer
on mortgage loans at the time that the Seller is seeking to sell real
estate, then the Seller may be able to ask a higher price for the real
estate than the existing market might otherwise support.
However, in the event that a Seller obtained a mortgage loan that is
insured in favour of the lender against default, then the Seller should
be very careful about allowing a Buyer to assume that existing mortgage
as the Seller has personally guaranteed the mortgage debt. In our office,
we recommend that any Seller whose existing mortgage is insured by the
Canadian Mortgage Housing Corporation, or a private insurer for high-ration
mortgage loans not allow that mortgage to be assumed.
The general opinions expressed herein are for information
purposes only and are not to be relied on. Individuals are encouraged
to seek legal advice as it relates to their specific fact scenario to
ensure they are fully aware of their legal rights and obligations.