Loan Assumptions

• When another person assumes your loan, that person becomes the borrower and you become the seller. After the loan assumption is complete, the interest rate and terms stay the same and the property title transfers from you to the person assuming your loan. Lenders typically must approve a loan assumption, meaning the borrower must have adequate credit and income to make the payments on the loan. Lenders also may charge a fee for completing the loan assumption.
  
  

Liability

• Not all loan assumptions release you from liability. Lenders often write a "due on sale" clause into your loan origination documents for any type of property. Due on sale means that if you sell your property or otherwise transfer the title, the lender can call the entire loan balance due. This means if you transfer the deed to your property to the buyer and you don't pay off the loan balance, the lender can still hold you legally responsible for the loan.
  
  

Release of Liability

• If someone assumes your mortgage loan, even if you transfer the deed to the new owner, you are still legally liable for the balance of the mortgage loan should the new owners fail to make payments or default on the loan unless you complete a release of liability form. With this form, the lender officially releases you from any legal liability for the loan should the person assuming your loan fails to make payments.
  
  

Considerations

• If your lender does not release you from liability and the person assuming your loan makes late payments, has the property repossessed or goes into foreclosure, the lender will name you on any legal action it takes. This information may also show up on your credit report. In the case of foreclosure or repossession, it can cause serious damage to your credit score.