Which type of mortgage allows the borrower to assume an existing mortgage, typically resulting in a lower interest rate?

The correct answer is "Assumable." An assumable mortgage allows a new borrower to take over the existing loan from the original borrower, along with its terms, including the interest rate. This can be particularly beneficial if the original mortgage has a lower interest rate compared to current market rates. The assumption process generally requires approval from the lender, but it can make purchasing a property with an existing mortgage more attractive for buyers since they can benefit from the more favorable terms that the original borrower secured.

In contrast, other mortgage types do not offer the same benefits regarding the assumption of an existing mortgage. For instance, equity mortgages are generally used to leverage the homeowner's existing equity, serving different financial purposes. Vendor takeback mortgages are provided by the seller of the property to facilitate the buyer's purchase but do not inherently allow assumption of existing debt. Wrap-around mortgages are a financing arrangement where a new loan wraps around an existing mortgage, instead of assuming it directly, which creates a different financial structure and may involve a higher interest rate.