There are several ways to make an assumable mortgage work. Here are a few of the most common:
Full Assumption – A seller in poor financial straits simply gives the buyer the title / mortgage and walks away.
Up-Front Payment – The buyer gives the seller a single payment of an agreed upon amount. In return, the buyer is given the title and begins paying the mortgage directly to the lender.
Monthly Payments – The buyer makes monthly payments to the seller. In return, the seller keeps his percentage of the interest and makes a full mortgage payment to the lender each month. The title may be held by either party, depending on the terms of the agreement.
Trust Account – Both the buyer and the seller are made members of a trust controlling the title and the mortgage. Payments are made to the lender each month from the trust account. The seller may also withdraw his take of the interest each month. The title is released to the buyer when the loan is paid off.