Are Mortgages Assumable in Canada? Here's the Ugly Truth
Everyone loves the idea:
"What if I could just take over the seller’s low mortgage rate?"
In theory, it sounds brilliant.
In reality? Almost no one pulls it off.
Here’s what most lenders won't tell you about assumable mortgages.
What Is an Assumable Mortgage?
An assumable mortgage is when the buyer of a home takes over the seller’s mortgage, including their existing rate and remaining term.
This sounds amazing if that seller locked in at, say, 1.99% back in 2021.
But...
The Catch: Lenders Don’t Want You To Assume That Rate
Yes - some lenders technically allow mortgage assumptions.
But in practice? They make it nearly impossible.
I've been in the mortgage industry for over 10 years.
I've heard of exactly one assumption being approved at one of Canada’s largest lenders.
Why? Because banks make more money if:
The original borrower pays a penalty
The new buyer takes out a new mortgage at today’s higher rate
Let’s be real - No one’s assuming a 6.79% rate. They’re trying to assume a 1.84% unicorn - and lenders don’t want that.
How Assumptions Actually Work (And Why They Usually Fail)
Let’s say the seller bought their home for $500,000, and after all their payments they’ve made, now owe $450,000
Now the home is worth $600,000
You’d think:
"Sweet, I’ll just take over their $450K mortgage with that gorgeous 1.84% interest rate."
Not so fast.
The lender will:
Order a new appraisal
Calculate the difference between the current mortgage balance and the new value
And require you to put down that amount in cash
So in this case?
You’d need to come up with $150,000 as a down payment.
Suddenly, that assumed mortgage doesn’t look so magical.
And here’s what most people don’t realize:
Mortgage assumptions are done entirely in-house with the lender - not through a mortgage broker.
That means you don’t have anyone rallying behind you or negotiating in your best interest.
You’re working within that bank’s rules, that bank’s guidelines, and that bank’s process - full stop.
No competition. No alternative options. Just hope and wait.
And guess what?
That same bank would make more money if the original borrower paid a penalty, and you got a new mortgage at today’s rate.
So they make it hard.
On purpose.
What’s the Difference Between an Assumption and a Covenant Change?
Assumption = You’re buying the home and taking over the mortgage
Covenant change = The property is not being sold. You’re just updating who’s on the mortgage:
Adding or removing a spouse
Taking a parent off the file
Qualifying solo after a separation
Both require qualification, but covenant changes are internal updates.
Assumptions involve a full title transfer - and a lot more resistance.
Bottom Line
If you’re hoping to assume a low-rate mortgage - don’t hold your breath.
The odds of getting it approved are tiny
The down payment requirements are massive
And lenders will put up every barrier they can
It sounds good on paper, but in the real world, it rarely happens.
Want to Know Your Real Options?
Don’t chase unicorns. Let’s find you the best strategy for today’s market - not yesterday’s rates.