What must happen for a subsequent buyer to be in privity of a mortgage?

For a subsequent buyer to be in privity of a mortgage, they must assume the mortgage. This means that the buyer agrees to take over the existing mortgage obligations from the seller, thereby establishing a direct legal relationship with the lender. By assuming the mortgage, the new buyer effectively steps into the shoes of the original borrower, becoming liable for the mortgage payments and complying with the terms of the mortgage agreement.

This concept of privity is essential in real estate transactions because it affects the rights and responsibilities of the parties involved. When the buyer assumes the mortgage, they gain not only the benefits of the property but also the associated debts, creating a bond between the new owner and the lender.

In contrast, simply refinancing the mortgage does not create privity with the original mortgage unless stipulated in the refinancing agreement, as refinancing typically involves taking out a new loan to pay off the existing one. Canceling the original mortgage eliminates any debt but does not establish any privity with the mortgage lender. Paying off the mortgage entirely would discharge the debt but, again, does not create privity unless the buyer has assumed it in the first place. Therefore, privity only exists when a buyer formally assumes the mortgage, thereby maintaining the connection to the original loan.