An assumption agreement in Ontario is a legal agreement that allows a buyer to take over the seller`s mortgage. This agreement is commonly used in real estate transactions, where the buyer is looking to purchase a property that has an existing mortgage. By signing an assumption agreement, the buyer accepts responsibility for making future mortgage payments and assumes the terms and conditions of the original mortgage.

When buying a property in Ontario, it`s essential to understand how assumption agreements work and the legal implications of entering into one. Here are some key points to keep in mind.

1. The lender must approve the assumption agreement

Before a buyer can assume a mortgage, the lender must approve the assumption agreement. The lender will evaluate the buyer`s creditworthiness and financial position to determine if they are eligible to take over the mortgage. If the buyer does not meet the lender`s criteria, the assumption agreement may be denied, and the buyer will not be able to proceed with the purchase.

2. The original terms of the mortgage apply

When a buyer assumes a mortgage, they take over the terms and conditions of the original mortgage. This means that the interest rate, payment schedule, and other terms of the mortgage remain the same. It`s crucial for the buyer to review the original mortgage agreement thoroughly to ensure they understand their obligations.

3. The seller remains liable for the mortgage

While the buyer assumes responsibility for making future mortgage payments, the seller remains liable for the mortgage until it is fully paid off. If the buyer defaults on the mortgage payments, the lender can go after the seller to collect the remaining balance owed.

4. There may be fees associated with the assumption agreement

Lenders may charge fees for approving an assumption agreement. These fees can include an assumption fee, an appraisal fee, and legal fees. The buyer should be aware of these fees and factor them into the overall cost of the transaction.

In conclusion, an assumption agreement is a legal agreement that allows a buyer to take over the seller`s mortgage. It`s important to understand the terms and conditions of the original mortgage and the legal implications of entering into an assumption agreement. By working with a reputable real estate lawyer, buyers can ensure they are protected throughout the process and avoid any potential legal issues down the line.