Assuming a mortgage

When a buyer chooses to assume an existing mortgage, they are essentially agreeing to take on the seller's debt as their own. The buyer signs a promissory note and becomes primarily responsible for paying back the loan. It is important to note that this does not automatically let the seller off the hook. Unless a specific agreement called a novation is signed by the lender, the seller remains liable for the debt as well. Without a novation, if the buyer stops paying and the home is sold for less than what is owed, the bank can sue both the buyer and the seller for the difference. A novation solves this by releasing the seller and making the buyer the only person responsible for the loan. Many modern loans have a "due-on-sale" clause, which effectively bans assumptions by requiring the full loan balance to be paid whenever the property is sold.