Contracts
A 'novation clause' in a purchase contract (specifically regarding an assumable mortgage) means the new buyer:
AA. Pays additional points to the lender
BB. Is substituted for the original borrower, who is fully released from liability✓ Correct
CC. Takes title subject to the mortgage without assuming personal liability
DD. Negotiates a new interest rate with the lender
Explanation
A novation in the context of mortgage assumption creates a new contract between the lender and the assuming buyer, releasing the original borrower from all liability. Without novation, the original borrower remains contingently liable even after sale.
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