What is meant by “assumption of mortgage”?

The term "assumption of mortgage" refers to a transaction where a buyer takes over the seller's existing mortgage loan and assumes the responsibility for making the remaining payments. This process typically requires the lender's approval, as they need to ensure that the buyer is qualified to take on the mortgage. The seller is relieved of the mortgage obligation, while the buyer benefits from the potentially lower interest rate and terms originally negotiated by the seller.

This concept is significant in real estate transactions, particularly in scenarios where interest rates have risen since the original mortgage was secured. By assuming the existing mortgage, the buyer can potentially secure more favorable financing than if they were to apply for a new loan at the current market rates.

In contrast, the other choices refer to different scenarios not involving the assumption of the mortgage. For example, one option discusses a seller paying off the mortgage before closing, which removes the obligation entirely, rather than transferring it to the buyer. Another option presents the idea of a new mortgage with the seller's consent, which does not involve taking over the existing mortgage but rather obtaining a new loan altogether. Lastly, a financing program managed by a real estate agent is unrelated to the concept of assuming a mortgage, as it implies administrative or brokerage functions rather than the transfer