A type of financing arrangement whereby an outstanding mortgage and its terms are transferred from the current owner to a buyer, hence also know as Transferable Mortgage. By assuming the previous owner's remaining debt, the buyer can avoid obtaining their own mortgage. When interest rates rise, an assumable mortgage is attractive to a buyer who takes on an existing loan with a lower rate.

Buyers must still qualify for the mortgage to assume it.

How it works

Many homebuyers typically take out a mortgage from a lending institution to finance the purchase of a home or property. The contractual agreement for repaying the loan includes the interest that the borrower must pay, as well as the principal repayments to the lender. If the homeowner decides to sell their home later, they may be able to transfer their mortgage to the homebuyer. In this case, the original mortgage taken out is assumable.