At closing, what adjustment is made when a buyer assumes a mortgage that has been partially paid?

When evaluating the situation in which a buyer assumes a mortgage that has been partially paid, it’s essential to understand how mortgage assumptions affect the closing statement.

In this case, when the buyer assumes a mortgage, they are taking over the seller's existing mortgage debt. If the mortgage has been partially paid down, there is a balance left that the buyer is now responsible for. Therefore, an adjustment must be made to reflect this transfer of responsibility.

In the adjustment process, the seller is credited for the amount they still owe on the mortgage, while the buyer is debited the same amount since they are now assuming that debt. If the assumption involves a partial payment of $300, this amount is reflected in the closing statement.

Making this adjustment ensures that both parties' financial responsibilities are accurately represented in the transaction. The seller receives credit for the portion of the mortgage that the buyer is assuming, while the buyer has this debit reflected in their closing costs, which effectively records the assumption of the mortgage obligation.

Overall, this accounting adjustment is crucial to ensure that both the seller and buyer are clear about the financial implications of the mortgage assumption at closing.