What happens to a mortgage when the property is sold?

When property is sold, the mortgage typically remains in place and becomes the responsibility of the buyer. This is because most residential mortgages are structured as assumable loans, meaning that the buyer can take over the existing mortgage under the same terms. The existing loan does not get canceled or erased simply because the ownership of the property has changed; instead, it transfers along with the property itself.

This transfer can occur without needing the seller to pay off the mortgage balance immediately, as the buyer generally assumes the obligations of the loan. However, it is important to note that if the mortgage agreement includes a "due-on-sale" clause, the lender has the right to demand full payment of the outstanding loan balance upon the sale of the property, which can complicate matters.

While some buyers may choose to apply for a new mortgage to replace the existing one, it is not a requirement in all cases, making it common practice to have the original mortgage remain intact and simply pass the responsibility to the new owner.