Assumption
National Real Estate Exam glossary · Financing
Definition
The transfer of an existing loan to a buyer who takes on personal liability for the debt, typically requiring lender approval. It differs from taking title 'subject to' the loan, where the buyer is not personally liable for the deficiency.
Assumption in plain English
When you buy a home with an existing mortgage on it, 'assumption' means you take over that loan and become personally responsible for paying it back — so the bank usually has to approve you first, just like they would a brand-new borrower. This is different from buying 'subject to' the loan, where you agree to keep making the payments but don't sign on as personally liable, so the bank can't come after you personally if things go bad. Think of taking over a friend's phone contract: if you formally 'assume' it, the carrier now holds you responsible for the bill; if you just quietly pay it for them, your name was never on the hook.
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