When a mortgage is assumed by another person then the original borrower's name is removed from the mortgage note and replaced with the person who is assuming the mortgage. So the original borrower is no longer listed on the mortgage note and the new borrower is now listed and legally responsible for repaying the loan according to the terms of the note.
If you are considering assuming a mortgage or having someone else assume your mortgage we recommend that you work closely with the lender that services the mortgage (the company you make your payments to) as well as potentially a real estate attorney to make sure that the loan assumption process is handled and recorded correctly.
When a mortgage is assumed the transaction should be documented by the county recorder's office for legal purposes. Additionally, if the assumption is done properly the mortgage should no longer be listed as an outstanding loan on the original borrower's credit report while it should appear on the new note holder's report. We recommend that you review your credit reports for the three major credit bureaus one-to-two months after your mortgage has been assumed to make sure that the loan is properly reflected on your reports.
If your credit reports show an error or do not have the most current information about the loan, you should contact the bureaus to correct the mistake. It may be helpful to provide the bureaus with the documents used to transfer the loan as well as the revised mortgage note with the name of the new borrower. It is important that your reports show that you are no longer responsible for the mortgage as this can impact your borrowing capacity as well as your credit score.
Finally, it is important to highlight that most mortgages are not assumable or transferable to another person. Additionally, some mortgage notes have an acceleration clause that requires the outstanding loan balance to be paid in full if the mortgage is transferred without the lender's authorization. We advise you to review your mortgage note carefully to determine if your loan is assumable and contact your lender to confirm what is possible.