finance
assumption
When a buyer takes over the seller's existing mortgage and becomes personally liable for repaying it. The lender usually must approve the buyer, and the original borrower may remain secondarily liable unless the lender grants a release or novation. Some government-backed loans are assumable, while most conventional loans with due-on-sale clauses are not.
- Exam tip
- Assuming a loan creates personal liability for the buyer; buying subject to the loan does not. Only a novation fully releases the seller.
- Example
- A buyer assumes the seller's FHA loan at 3% interest, paying the seller the difference between the price and the loan balance in cash.
Related terms & state variants
Sources
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Last verified: 2026-10-23