FinancingCreative_financingHARD
A buyer agrees to assume an existing VA loan on a property. The lender approves the assumption and releases the original borrower from liability. What has occurred?
Correct Answer
B) A novation, because the lender has substituted the new borrower and released the original borrower
When a lender approves an assumption and releases the original borrower from all liability, this is a novation -- a new obligation is substituted for the old one with the original party released.
Answer Options
A
A purchase subject to the existing loanB
A novation, because the lender has substituted the new borrower and released the original borrowerC
A wraparound mortgageD
A land contractWhy This Is the Correct Answer
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Related Topics & Key Terms
Key Terms:
creative_financingfinancingassumptionnovation
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