What Is a Deed of Novation?

What Is a Deed of Novation?
A deed of novation differs from a simple mortgage assumption.

Transfers to Third Parties

A deed of novation can be used to transfer the rights and obligations of a current mortgage borrower to a new borrower or third party. If you have a mortgage loan and you have another party willing to assume it, a novation effectively transfers your rights and obligations to that person. A deed of novation, or formal novation transferring your mortgage loan to another, completely relieves you of any responsibility for your old loan.

Parties to a Novation

Approval of a deed of novation to transfer a mortgage loan's obligations to a third party isn't guaranteed. In the case of a mortgage loan, the current borrower and the third party willing to assume the loan as well as the lender must all agree to novation of the loan. Lenders don't typically approve mortgage assumption or novation requests, and the ones that do have their own submission, review and approval processes.