What does "assumption of mortgage" mean?

The term "assumption of mortgage" refers to the situation where a buyer takes over the seller's mortgage obligations and liabilities. In this arrangement, the buyer effectively steps into the seller's shoes regarding the existing mortgage loan, agreeing to make the payments and adhere to the original terms of the mortgage. This can be advantageous for the buyer if the terms of the existing mortgage are favorable compared to current market rates.

In contrast, the other options do not accurately describe the concept. Purchasing property in cash without any financing does not involve any assumption of a mortgage, as there is no existing mortgage to assume. Refinancing a mortgage before selling pertains to altering the loan terms rather than assuming someone else's debt. Lastly, a bank taking responsibility for the mortgage does not align with the definition of assumption, as the buyer, not the bank, is assuming the obligations related to the loan.