Assumable Mortgage

A type of financing arrangement in which the outstanding mortgage and its terms can be transfered from the current owner to a buyer. By assuming the previous owner's remaining debt, the buyer can avoid having to obtain his or her own mortgage.

Investopedia Says:
Buyers are typically attracted to homes with existing assumable mortgages during times of rising interest rates. This is because they can assume the seller's mortgage, which was created when interest rates were lower, and use it to finance their purchase.

However, if the home's purchase price exceeds the mortgage balance by a significant amount, the buyer will either need to provide a sizable down payment or obtain a new mortgage anyway. For example, if a buyer is purchasing a home for $250,000, and the seller's assumable mortgage only has a balance of $110,000, the buyer would need a down payment of $140,000 to cover the difference, or would have to get a separate mortgage to secure the needed funds.

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Mortgage giving the borrower the right to assign the unpaid balance of his obligation, without prepayment penalty, to another person upon sale of the mortgaged property. The buyer assumes payment of the loan at the same rate and terms for the remainder of the mortgage, and the seller remains secondarily liable for the obligation. Department of Veterans Affairs mortgages and mortgages insured by the Federal Housing Administration are generally assumable by the buyer. Contrast with Portable Mortgage. See also Assumption; Due-On-Sale Clause.