A loan assumption is identical to the subject to transaction with the exception
that both the seller and buyer will both be liable for the mortgage payment.
The buyer will be primarily liable for the loan.
However, in the event of default, the seller could become liable if the buyer cannot satisfy the debt.
With a loan assumption, however, the seller may receive a “release of liability” from his lender,
which would waive him of all liability on the loan. The seller would then receive a
novation (new contract) from the lender making him solely liable for the loan balance.
A loan assumption with a release of liability gives the seller the most protection in this type of transaction.
See also: Land/Installment Contracts