If I Want to Sell My Home by Land Contract, Can I Assign the Existing Mortgage to the New Buyer?

Most mortgage contracts do not allow for the assumption of the debt by another party, even if that assignment is for the same property.

We suggest a careful reading of the existing mortgage contract, as most mortgage documents specifically prohibit such an action.

If the assumption of the existing mortgage debt by the ‘new owner/third party’ is not an option, either the mortgage must be fulfilled (paid in full) prior to the execution of the new Land Contract, or the Land Contract must be subjugated contractually to the existing mortgage.

It is best if a Land Contract is executed against a property that carries no mortgage, or on a property under which the mortgage that has been paid off prior to the signing of the Land Contract (perhaps by using the down payment directly for such a purpose).

Any new home buyer with common sense would never agree to a Land Contract option that contractually subjugates the mortgage as the primary guarantee, as in essence that buyer is putting his or her investment at risk if the seller fails to pay the mortgage. (UNLESS, of course, the seller agrees to allow the new buyer to somehow confirm payments are being made to the mortgage company.)

For details on Standard Legal’s Land Contract documents, see here.