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 for $300,000 and keep the same mortgage. The buyer pays $50,000 cash for the equity and assumes the mortgage, becoming liable for the debt. However, the original owner remains liable as well.

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