Assumable Mortgage.
In plain English
An assumable mortgage is a home loan that a buyer can take over from the seller, keeping the seller's original interest rate, balance, and remaining term. This matters most when rates have risen since the seller got the loan, because the buyer inherits the older, lower rate. Government-backed loans (FHA, VA, and USDA) are commonly assumable with lender approval, while most conventional loans are not. The buyer still has to qualify with the lender, and they usually need cash or a second loan to cover the gap between the loan balance and the home's price.
01Why it matters
If the seller locked a low rate years ago and rates are higher now, assuming their loan can save you a lot in interest over the life of the loan, which over 30 years can add up to tens of thousands of dollars.
02The math, step by step
A seller has an FHA loan with a $250,000 balance at a rate well below today's, but the home is now worth $330,000. You assume the loan, keeping that lower rate, and you cover the $80,000 difference with cash or a second loan. The lender checks that you qualify before approving the assumption. You inherit the loan's remaining term and rate instead of borrowing fresh at today's higher rate.
03What this is NOT
A real assumption requires the lender's approval and puts the loan in your name. Quietly making someone else's payments without lender sign-off is not an assumption and can trigger the loan's due-on-sale clause.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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