Which mortgage type allows a buyer to take over a seller's existing mortgage while keeping the seller liable?

The correct answer is an assumable mortgage. This type of mortgage allows a buyer to take over the seller's existing mortgage and its terms, which can be advantageous if the original mortgage has a lower interest rate compared to current market rates. When a mortgage is assumable, the buyer generally assumes responsibility for the payments, but the seller remains liable for the original loan. This arrangement can provide flexibility in negotiations, particularly in competitive markets.

In contrast, a conventional mortgage typically does not offer the ability to transfer the loan balance to a new borrower, meaning the buyer would need to qualify for a new loan independently. A wraparound mortgage is a type of creative financing where a new mortgage wraps around an existing mortgage, keeping the seller's mortgage in place, but it involves creating a new loan with a different structure. Lastly, a subordinated mortgage refers to a loan that ranks below another loan in case of liquidation, and is not directly related to the transfer of a seller's existing mortgage.

Understanding the characteristics of different mortgage types is crucial for navigating real estate transactions effectively.