Assumable mortgage
A mortgage a buyer can take over from the seller at its existing rate and terms — valuable when that rate is well below current rates. Mainly FHA, VA and USDA loans.
What does assumable mortgage mean?
With an assumable mortgage, a qualified buyer takes over the seller's existing loan — including its interest rate — instead of getting a new one. When the seller's locked-in rate is far below today's, that can be a large saving. Government loans (FHA, VA, USDA) are generally assumable; most conventional loans are not. The catch: the buyer must still qualify, and must cover the gap between the loan balance and the price in cash or a second loan.
Frequently asked
Which mortgages are assumable?
Mainly government loans — FHA, VA and USDA — are assumable; most conventional loans are not. A qualified buyer can take over the seller’s loan and its rate, which is valuable when that rate is well below today’s.
What is the catch with assuming a mortgage?
The buyer must still qualify with the lender, and must cover the gap between the loan balance and the purchase price — often a large sum — in cash or a second loan. That gap is the main obstacle when the seller has significant equity.
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