Purchasing Property with an Existing Mortgage


The most common way to buy a home that already has a mortgage is simply to pay off that debt entirely during the transaction. This happens when a buyer pays for the property in cash or secures their own new loan to cover the purchase price. In either scenario, the money provided by the buyer is used to pay off the seller’s existing mortgage balance. Once the lender receives this payment, they record a document called a satisfaction of mortgage, and the buyer takes ownership of the property completely free of the old debt.However, in some situations, a buyer might prefer to take over the seller’s existing loan rather than getting a new one. This is distinct from paying it off and is generally done in one of two specific ways: assuming the mortgage or purchasing subject to the mortgage. The main difference between these two methods comes down to who is legally responsible if the mortgage payments stop and the bank has to foreclose.