You’ve heard of buying a used car – but what about a used mortgage? An assumable mortgage is when a homebuyer takes over the seller's loan. While this is not a very common occurrence in real estate, it does happen and can be beneficial for both parties.
In this case, the buyer assumes the rate, payment period, current principal balance and other terms of the seller’s existing mortgage. Assumable mortgages are usually limited to loans backed by the Federal Housing Administration (FHA loans) or the Department of Veterans Affairs (VA loans).
Who benefits from an assumed mortgage?
Assumable mortgages are especially enticing to buyers when the assumable loan's interest rate is lower than current interest rates – they’ll pay less over the long term. Additionally, buyers can benefit from lower closing fees.
Sellers benefit because a larger pool of buyers is available when there is the option to purchase with an assumable mortgage.
Wondering if you should be buying or selling with an assumable mortgage? Reach out today and our experts can answer your questions and get you started in the process.