An assumable mortgage is a loan that allows a home buyer to take over a seller's mortgage when purchasing a home.

Assuming a mortgage requires the lender's approval. When you assume a mortgage you inherit both its interest rate and monthly payment schedule.

t can mean big savings if the interest rate on the existing mortgage is lower than the current rate on new loans - the lender, though, can change the loan's terms.

Assumable mortgages aren't a free ride: you still need to qualify for the loan and you have to pay closing fees, including the costs of the appraisal and title insurance.

The lender also holds the seller liable for the loan. For example, if you default and the lender forecloses, but the property sells for less than the loan's balance, the lender can sue the seller for the difference.

An assumable mortgage might still not cover the entire purchase price of the property. If the loan is for $100,000 and your purchase price is $110,000 the buyer will still need to make up the difference.

Get more information on Assumable Mortgage in the Real Estate Forum