Definition
Mortgage assumption allows a buyer to take over the seller's existing mortgage. The buyer continues paying the same lender at the same contractual terms (rate, payment frequency, remaining term).
Advantages: - If the assumed loan rate is below current market rates → significant savings - Avoids new mortgage break penalties (seller doesn't have to break their loan) - Little or no discharge fees
Conditions: - Lender must approve the buyer (credit check, income, loan-to-value ratio) - If purchase price exceeds assumed mortgage balance, buyer must finance the difference (2nd mortgage or additional down payment) - Not all lenders allow assumption — check the contract
Seller liability: in some contracts, if the buyer defaults, the seller may remain liable. Request a release of liability from the lender.