Assumable Mortgages Quick Facts

Interest rates are currently on the rise, and it’s difficult to get a loan below 4% interest. With some existing loans as low as 3%, more buyers may be interested in assuming a loan. Loan assumption refers to a buyer taking over some terms of an existing loan, including the rate, repayment period, and current principal balance, rather than getting a new loan. This has the primary benefit to the buyer of obtaining a lower rate on one’s mortgage.

There are some important things to know first. Not all loans are assumable. Typically, FHA loans, USDA loans, and VA loans are assumable, while conventional loans are not. These rules aren’t set in stone, so if you are interested in assuming a loan, make sure it’s assumable first. That doesn’t mean it’s a done deal, though — after making sure it’s possible, the assumptor would still need to apply for the loan and meet the lender’s requirements, and the down payment depends on the seller’s equity.

If you’re the seller, the primary benefit to having your loan assumed is that it may make your home more attractive to buyers, meaning a faster and potentially higher-priced sale. There is one drawback, though. If the lender doesn’t release you from liability as the original borrower, the assumptor not making payments or defaulting on the loan could affect your credit score.


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