What is the purpose of an assumability clause in a mortgage?

The purpose of an assumability clause in a mortgage is to permit the transfer of the mortgage from one party to another. This clause is significant because it allows the buyer purchasing the property to take over the seller's existing mortgage under the same terms and conditions, rather than needing to secure a new loan. This can be advantageous in a market where interest rates have increased since the original mortgage was taken out because the buyer can benefit from the potentially lower interest rate of the existing mortgage.

The assumability clause can also serve to make a property more attractive to buyers, as it may reduce their borrowing costs and simplify the financing process. It is a useful tool that enhances flexibility in property transactions.