Massachusetts Real Estate License Practice Test

In real estate terminology, what does it mean to have a mortgage 'subject to'?

1. You are completely released from loan liability

2. You take over the payments but remain liable

3. You can change terms of the mortgage

4. You defer the payments until later

The correct answer is: You take over the payments but remain liable

In real estate terminology, when a mortgage is described as 'subject to', it means that the buyer takes over the property along with the existing mortgage payments but does not assume personal liability for the mortgage. This means that the original borrower remains legally responsible for the mortgage debt, even though the buyer is making the payments. This arrangement can be advantageous for buyers, as they can take possession of the property and its financing without formally taking over the loan. However, it's crucial to understand that the lender retains the right to pursue the original borrower for the debt in case of default. The buyer benefits from being able to negotiate the terms of the deal without directly affecting their own credit at that moment, but it also means the original borrower remains exposed to any financial repercussions associated with the mortgage. The other options do not apply in this context. Being completely released from loan liability does not occur simply by taking over payments, as the original borrower remains liable. Changing the terms of the mortgage typically requires lender approval, which is not implied by being 'subject to'. Deferring payments is also not a feature associated with this type of arrangement; usually, payments will continue as per the original mortgage agreement.