What does assumption refer to in a mortgage context?

In the context of a mortgage, the term "assumption" refers to the transferring of mortgage obligations to another party. This means that one borrower can transfer their responsibilities for the mortgage loan to another individual, who then takes over the payment obligations under the terms of the original mortgage agreement. This can be an attractive option in a changing market or for buyers looking to take advantage of an existing loan with favorable terms.

Assumptions are often utilized in real estate transactions where the buyer is interested in assuming the seller's existing mortgage instead of obtaining a new loan. This can facilitate a smoother transaction and potentially provide financial benefits to the buyer if the existing loan has a lower interest rate than current market rates.

The other options do not fit the definition of assumption. For example, full repayment of the mortgage involves settling the entire loan balance, while reducing interest rates and extending payment terms pertain to modifying the loan itself, not transferring obligations.