Assumption of mortgage

Taking upon oneself the obligations of a mortgagor toward a mortgagee, generally as part of the purchase price of a parcel of real estate. By assuming the mortgage rather than taking Subject to the Mortgage, the purchaser becomes personally liable on the debt. The seller is not relieved of the obligation unless the lender agrees to do so in a Novation. Many lenders refuse to allow mortgage loans to be assumed unless they approve of the transaction; often they require points or increase the face rate of interest.

The purchase of mortgaged property whereby the buyer accepts liability for the debt that continues to exist. The seller remains liable to the lender unless the lender agrees to release him. See Novation. Contrast with Subject to Mortgage.
Example: Abel owes a 30-year mortgage loan of $250,000 against his house. Baker wants to buy the house and keep the same mortgage. Baker pays $50,000 cash for the Equity and assumes the mortgage. Baker becomes liable for the debt, but Abel remains liable also.

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Assumption of mortgage is the purchase of mortgaged property whereby the buyer accepts liability for the debt that continues to exist. The seller remains liable to the mortgage lender (whether the lender is a commercial bank, thrift, credit union, mortgage banker or mortgage broker) unless the lender agrees to release him.

For example, a homeowner owes a 30-year mortgage loan of $250,000 against his house. A prospective buyer wants to purchase the house and keep the same mortgage. The buyer pays $50,000 cash for the equity^[1] and assumes the mortgage, becoming liable for the debt. However, the original owner remains liable as well.

Notes

1. ^ In real estate, equity refers to the interest or value that the owner has in real estate over and above the liens against it

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