Assumable Mortgage Buyer takes over seller's original, below-market rate mortgage. Lowers monthly payments. Not permitted on most new fixed rate mortgages. Back Seller provides all or part of financing with a first or second mortgage. Wraparound Seller keeps original low rate mortgage.
Buyer makes payments to seller who forwards a portion to the lender holding the original mortgage.
Offers lower effective interest rate on total transaction. Lender may call in old mortgage and require higher rate. If buyer defaults, seller must take legal action to collect debt. Fixed interest rate but monthly payments may vary according to agreed-upon schedule or index. Permits rapid payoff of debt because payment increases reduce principal.