A Deed of Trust to Secure Assumption is a Texas legal document that protects the Seller when a Buyer assumes an existing mortgage. This document creates a lien on property, giving the Seller the right to foreclose if the Buyer stops making payments. The document works with an Assumption Deed which transfers ownership while the Deed of Trust to Secure Assumption protects the Seller’s financial interest.
These documents may be used in divorce cases where one spouse assumes the mortgage, but apply to any situation where a buyer takes over an existing loan with lender approval.
What is a Deed of Trust to Secure Assumption?
When a loan is being assumed, in addition to an Assumption Deed, the Seller should require the Buyer to sign a Deed of Trust to Secure Assumption. This document gives the Seller a lien on the property to secure the Buyer’s promise to pay the mortgage.
Why Use a Deed of Trust to Secure Assumption?
This security document protects the Seller by creating a legal lien on the property.
If the Buyer does not pay the mortgage, the Seller has the right to foreclose the Deed of Trust to Secure Assumption and take the property back.
Deed of Trust to Secure Assumption in Texas Divorce Cases
A Deed of Trust to Secure Assumption and an Assumption Deed are commonly used in divorce cases where one spouse is awarded the real estate property and agrees to take over the loan.
The Assumption Deed transfers the property and the Deed of Trust to Secure Assumption secures the promise to pay the mortgage. If the spouse who is awarded the property does not pay the mortgage, the other spouse hires an attorney to take the property back.
Understanding Assumption Deeds in Texas
An Assumption Deed is a document used to transfer ownership of real estate property when the new owner assumes an existing mortgage on the property being transferred.
Additionally, the new owner agrees to comply with all provisions of the existing mortgage, including making payments to the mortgage company. The new owner takes over the payment of the mortgage.
When can you use an Assumption Deed
You can use an Assumption Deed when the mortgage company has given written approval for the loan assumption.
Mortgage Company Approval
If the mortgage company has agreed, in writing, to allow the new owner to assume the payment of the mortgage, you can use an Assumption Deed.
In this context, Assumption means the new owner promises to make all payments on the mortgage and perform all other obligations of the mortgage, including paying the property taxes and insurance.
The Due on Sale Clause
Good to know: Most mortgages contain a clause called a Due on Sale Clause. This clause prohibits the assumption of the loan without first obtaining permission from the mortgage company.
Note: If the mortgage company DOES NOT agree to the assumption of the loan, do not transfer the property.
Proper Loan Assumption
If the mortgage company allows the assumption of the loan, the current owner may use an Assumption Deed to transfer the property to the new owner. In exchange, the new owner signs a written promise to pay the mortgage and to comply with all other requirements of the mortgage. This includes the payment of the property taxes and insurance.
Again, you should not use an Assumption Deed unless the mortgage company has approved the assumption of the loan.
Keep in mind, even if the lender is an individual or private company, you should still get permission from the individual lender before the mortgage is assumed.
Assumption Deed Example
Good to know: As an example – If you are paying $100,000 for a property and that property has a mortgage with a balance of $75,000, with permission, you can assume the balance of $75,000 and pay the Seller the $25,000 difference.
After you receive your Assumption Deed, you take over payments to the mortgage company and pay $25,000 to the Seller. Remember, if you do not make the payments, the mortgage company can take the property from you.
FAQ
What is a Deed of Trust to Secure Assumption in Texas?
A Deed of Trust to Secure Assumption is a legal document that gives the Seller a lien on property when a Buyer assumes an existing mortgage. This document protects the Seller by giving them the right to foreclose and take the property back if the buyer stops making mortgage payments.
What is the difference between an Assumption Deed and a Deed of Trust to Secure Assumption?
An Assumption Deed transfers ownership of the property to the new owner. A Deed of Trust to Secure Assumption secures the Seller’s interest by creating a lien on the property. With both documents: The Assumption Deed transfers the property and the Deed of Trust to Secure Assumption protects the Seller if the Buyer defaults on the loan.
When can you use an Assumption Deed in Texas?
You can use an Assumption Deed only if the mortgage company has agreed in writing to allow the new owner to assume the mortgage. The new owner must promise to make all payments on the mortgage and perform all other obligations, including paying property taxes and insurance. Never transfer property that has a mortgage without the lender’s approval.
When are Deed of Trust to Secure Assumption documents used in Texas divorce cases?
In Texas divorce cases, one spouse may be awarded the real estate property and agrees to take over the existing mortgage. The Assumption Deed transfers the property and the Deed of Trust to Secure Assumption protects the departing spouse’s financial interest. If the spouse who keeps the property does not pay the mortgage, the other spouse may hire an attorney to foreclose and take the property back.
What is a Due on Sale Clause in a mortgage?
A Due on Sale Clause is a provision in most mortgages that prohibits the assumption of the loan without first obtaining permission from the mortgage company. This clause protects the lender’s interests when property ownership changes.
Contact Us
If you have any questions about these documents, email attorney Scott Steinbach directly at scott@texaspropertydeeds.com. Or call 972-960-1850.