What is an assumable mortgage?

An assumable mortgage is a home loan structure that allows a buyer of a property to take over, or assume, the loan held by the seller. At the time of purchase, the buyer simply acquires the principal loan balance, interest rate and repayment period, according to Bankrate.

The primary advantage of an assumable mortgage is that a buyer can often take over a loan with more favorable rates and terms than a new loan would offer. Loans insured by the Federal Housing Administration or guaranteed by the U.S. Department of Veterans Affairs are the only loans that have this feature, according to Bankrate. Buyers must apply and meet lender qualifications to assume the mortgage.