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A payment takeover contract is an arrangement in which a buyer acquires an asset by assuming the existing owner’s loan obligations.
 Payment Takeover Contracts

A payment takeover contract is an arrangement in which a buyer acquires an asset by assuming the existing owner’s loan obligations. This might include paying a lump amount in addition to the acquisition agreement.

Original Contract Obligations and Restrictions

Before entering into a payment takeover contract, all parties should be aware of the original contract’s (and lending party’s) duties and constraints, as well as the implications for secondary transactions. Because the buyer agrees to assume the seller’s loan obligations, the assets were obtained via financing.

Examine All Current Contracts

The finance might have come from the asset’s original seller or from a third-party lender, as is often the case with auto loans and mortgages. Entities wanting to engage into a payment takeover contract must evaluate and comprehend all current arrangements pertaining to the purchase/financing of the asset being taken over.

Restrictions on Resale

Although resale limitations on assets are uncommon, they do occur on occasion. For example, there exist limitations, covenants, and rules on certain real estate properties that prevent purchasers from reselling the property within a certain time frame.

Loans, unlike asset sales, are often not transferrable to other parties. Amount agreements often require the original borrower to repay the loan in full. If another entity want to purchase the asset, it must get its own financing or pay cash.

Ascertain that ownership and financing are transferable.

Buyers should check if the title or ownership of the item they intend to acquire is transferable, regardless of whether there are limitations in the sales agreement or financing arrangement.

It is permitted if the asset and finance are transferrable and the potential buyer want to purchase the asset by assuming pending loan payments. This signifies that the lender considers the buyer to be liable for repaying the debt.

If the financing is not transferrable, the original owner is still obligated to make the outstanding instalments. In this case, the payment takeover transaction becomes an indirect transaction in which the new buyer transfers loan payments to the previous buyer and depends on the latter to pay off the lender.

This is perilous for the new buyer unless a security mechanism is included in the contract that holds the previous buyer accountable for payment failures.


When assets are sold via a payment takeover, the lender obtains a lien on the property. In the case of a default, the lien provides the lender the ability to sue the borrower for non-performance of the debt or repossess the asset.

Individuals should not assume loan payments on assets where the lender has a lien unless the contract expressly states that they own the property. If not, they risk delivering funds to the original buyer without the buyer repaying the loan as promised.

Acquiring Liabilities

Once you take over a mortgage, you are responsible for all responsibilities, including interest rates and monthly payments. However, if the interest rate on the newer loan is lower than the interest rate on the old loan, you may be able to save some money.

However, you should be aware that lenders have the right to amend the loan’s terms and conditions at any time (including interest rates).


If you do not make mortgage payments on time, the lender may foreclose. If the home sells for less than the mortgage sum, you might be sued for the difference.

It is not simple to acquire a mortgaged property via a payment takeover arrangement. Before you can receive one, you must first go through the pre-qualification procedure and pay the closing charge. You should also take into account the cost of an appraisal and title insurance.

Consider the following scenario:

You intended to spend $100,000 on a home.

The property’s takeover mortgage is worth $95,000 and has a 7% interest rate.

All you have to do is put down $5,000 and the property is yours.

Most of the time, you must make up the difference between the asking price and the amount of the takeover mortgage.