Definition
When you assume a loan, you take over the original borrower's mortgage and become responsible for payments. Not all mortgages are assumable, but FHA and VA loans typically are. Assuming a low-rate mortgage when rates have risen is genuinely valuable.
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Not all mortgages are assumable; lender approval is typically required. FHA loans are assumable to qualified buyers; VA loans are assumable to other veterans or qualified buyers; conventional loans are generally not assumable. Assumption allows a new buyer to continue the original loan at the original interest rate (valuable if rates have risen). Assumption usually requires the new borrower to meet lender criteria (credit, income, assets) and pay an assumption fee. The original borrower may remain liable as a co-signer depending on lender requirements.
Pro Tip
If your loan is assumable and rates have risen, emphasize this to buyers; it's a valuable feature that can justify your asking price.
Example
You're selling your FHA home with a 3.5% mortgage when market rates are 6.5%. The buyer assumes your loan, continues at 3.5%, and you're released from liability after qualification.