Loan Assumption is one of the misunderstood concepts in real estate even among professionals like brokers and agents. A lot of them just don’t know how to go about it or can’t simply do it right.
While it’s true that a Pag-IBIG Housing Loan is assumable, it should be approached very carefully and with the help of a competent lawyer. Once you do it wrong, it could lead to a lot of problems, stressful situations and possibly loss of money.
If you are the one assuming the loan, for instance, one of the worst things that could happen is this: You religious pay the monthly obligation to the loan until such time that it is already fully paid. Suddenly you realize that Pag-IBIG doesn’t recognize you as the buyer and won’t transfer the title in your name. It’s like the original buyer is using “your money” to pay for his loan. How would you react if you are in this situation? Naturally, you would feel deceived. Sadly, a lot of people have been into this situation. And if you know someone who is into this, please do them a favour by sharing this article.
Here, we’ll show you two documents that you can use when assuming a loan and we also provide an sample of each.
The Assignment of Contract
This form is essentially used when one party (the original buyer) to a contract wants to assign his full interest in the contract to another party (the new buyer). In other words, nothing is changed in the contract except the fact that one party is being substituted by another.
When crafting this contract, it is important for the assignor (the party assigning the contract to another) and the assignee (the other party to whom the contract is being assigned) to agree and include an “indemnify and hold harmless” clause. Essentially, this means that the assignor releases full responsibility of the contract to the assignee.
Note: A copy of the original contract should be attached to this form and both parties (and their lawyers) should keep copies of this document.
Sample Form: Assignment of Contract
This assignment of contract is made on (date here) between (assignor name and address) and (assignee name and address).
For valuable consideration, the parties agree to the following terms and conditions:
(list your terms here)
Both parties have signed this assignment on the date specified at the beginning of the document.
(Assignor Name and Signature)
(Assignee Name and Signature)
Notice of Assignment of Contract
Sometimes a third party is involved and needs to be notified in writing when an agreement such as the one above is made. This should be the case when you assume a Pag-IBIG Housing Loan from someone else. The Notice of Assignment of Contract is a document meant for this purpose. On the part of the third party, they are now aware of the fact that a new party takes over the contract and should be the one responsible for all its benefits and obligations.
Sample Form: Notice of Assignment of Contract
Date : _____
To: (Home Development Mutual Fund)
RE : Assignment of Contact
This notice is in reference to the contract described in the attached document. (Please see the attachment.)
Please be advised that as of (date of assignment), all interest and rights under this contract which were formerly owned by (name and address of assignor) have been permanently assigned to (name and address of assignee).
Please be advised that all of the obligations and rights of the former party, the assignor, to this contact are now the responsibility of the new party to this contract.
(Name and signature of the Assignor)
Always consult a competent lawyer when drafting documents of this kind. Don’t make the mistake of just relying on your broker to go about this. I’ve heard lots of stories and complaints from people who did this kind of transaction only to wind up with problems later on. Don’t be one of them.
This article is written by Carlos Velasco in response to several request from Pag-IBIG members who visited this website and want to know the process of assuming a housing loan.