Buy a Home, Keep the Seller’s Rate
Buy a Home, Keep the Seller’s Rate
With interest rates nearing 7%, many homebuyers in the U.S. are exploring assumable mortgages as a strategic way to save money. By taking over a seller’s existing home loan with a lower interest rate, buyers can reduce their monthly mortgage payments significantly. This article explains how assumable mortgages work and why they’re gaining popularity in today’s housing market.
A New Path to Affordability
In today’s housing market, where interest rates for new mortgages often hover around 6.5% to 7%, many buyers are finding it difficult to afford monthly payments. As a result, some are turning to an option that was once considered rare: the assumable mortgage. This financing method allows a homebuyer to take over the seller’s existing mortgage, along with its interest rate, repayment schedule, and remaining loan balance. In doing so, the buyer may sidestep current market rates and enjoy significantly lower monthly payments, especially if the original mortgage was secured before rates began to climb.
What Assumption Really Means
An assumable mortgage essentially means that the buyer steps into the financial shoes of the seller. The new homeowner agrees to take over the loan, continuing the payments based on the original terms. This can be particularly beneficial when the seller’s loan was issued during a period of historically low interest rates, such as 2020 or 2021. For example, if the seller has a 3% mortgage and today’s average is close to 7%, the buyer could save hundreds of dollars each month—and tens of thousands over the life of the loan.
Which Mortgages Qualify
However, not all mortgages are assumable. The option is typically available for government-backed loans such as FHA, VA, or USDA mortgages. These loan programs generally include clauses that permit assumption, provided that the buyer qualifies under the lender’s standards. In contrast, conventional mortgages usually do not offer this option unless specifically stated in the loan contract. Before proceeding, a potential buyer must first verify that the seller’s loan can, in fact, be assumed.
How the Process Works
The assumption process itself resembles the steps of applying for a traditional mortgage. The buyer must still be approved by the current lender, who will assess the buyer’s credit score, income, and financial health to ensure they are capable of maintaining the loan. Additionally, if the home has increased in value since the original mortgage was taken out, the buyer will need to cover the difference between the mortgage balance and the current sale price. This is known as the equity gap, and it must typically be paid in cash or financed through a secondary loan.
Win-Win for Buyers and Sellers
Despite the added complexity, both buyers and sellers can benefit from this arrangement. Buyers, of course, gain access to better loan terms that may no longer be available on the open market. In a high-rate environment, this could be the key to affording a home that would otherwise be out of reach. Meanwhile, sellers can market their homes more attractively by highlighting the lower interest rate available through assumption. This feature can give a property a competitive edge, especially when compared to other listings that require full-priced new mortgages.
Things to Watch Out For
It’s important to be aware of some challenges as well. The equity portion may be significant, particularly in hot housing markets where prices have risen sharply. Additionally, the process of getting lender approval for the assumption can be time-consuming, and not all lenders are eager to process these types of transactions. Some may require extensive documentation or offer slower timelines than typical mortgage applications. Furthermore, assumable loans generally do not allow buyers to borrow extra funds for renovations, moving costs, or other needs, as they are tied to the original loan balance.
Final Thoughts
In conclusion, assumable mortgages are gaining traction for good reason. They offer a practical way to reduce borrowing costs and monthly expenses in an otherwise expensive real estate environment. While they’re not suitable for every transaction or buyer, they can be a smart and effective solution for those who qualify and are prepared to handle the up-front equity requirements. As more buyers and sellers learn about this strategy, assumable mortgages are likely to become a valuable tool in navigating the complexities of the 2025 housing market.
Jack C Bharat
AmeriGroup Residential & Commercial Properties. Inc.
122-15 111th Avenue, S Ozone Park, NY 11420
Email: jackcbharat@gmail.com
Phone: (718) 805-6982
Jack C Bharat has been in the Real Estate Business since 2003. As a Realtor & Developer, his experience in buying dated, distress or fixer upper and renovated them back for resale can help both buyers and sellers in their transactions. Graduated in 1999 from Queens College (CUNY) Flushing, with a Bachelors of Arts Degree and in 2012 from LaGuardia College with Goldman Sachs 10K Small Business Certificate Of Entrepreneurship, Mr Bharat is always educating himself to stay current and sometimes ahead of Real Estate Market Trends. He is currently a Notary Public in the State of NY as well.
Mr Bharat has completed real estate projects in New York-Queens & Long Island, Florida-Ocala & Coral Springs & recently (Nov 2023) 8 Units Apt in Providence, Guyana. His passion for creating projects that blend functional modern architectural design in harmony with the natural environment are evident in his most recent commercial project in Providence Guyana, currently under initial phase of construction. Mr Bharat also is the CEO of Liberty Office Supplies & Equipment, Inc. A Certified Minority Business Enterprise (MBE) with New York City & New York State. Established in May 1999, Liberty provides a wide range of office supplies and work as a sourcing company for the Federal Government by being a GSA schedule holder.
Jack is Licensed as a Real Estate Broker in State of New York and in the State of Florida. He has knowledge in both residential and commercial sales. His motto “Working with Clients to achieve their real estate goals” is what drive him to be on top of his game. He is very involved in his community especially with social and educational issues. He is the proud sponsor of a local Cricket Team, Boxing and donates his time and money to various organizations that work with children, abuse victims and the elderly. He is cited by NYC Mayor’s Office, NYS Assembly and NYC Council for his leadership role in his community.
Mr Bharat has three daughters: Alicia who graduated with her Masters Of Science in Education from Queens College and is now a STEM Teacher with the NYC Dept of Education, Kayla who has recently (2024) graduated from CUNY School for Public Health with her Masters of Public Health in Environmental & Occupational Health Sciences & works as an Environmetal Health & Safety Specialist with Sloan Kettering Cancer Ctr. and Jessica who is currently enrolled as a senior at Queens College pursing her goal as a Dentist.
Mr Bharat has completed real estate projects in New York-Queens & Long Island, Florida-Ocala & Coral Springs & recently (Nov 2023) 8 Units Apt in Providence, Guyana. His passion for creating projects that blend functional modern architectural design in harmony with the natural environment are evident in his most recent commercial project in Providence Guyana, currently under initial phase of construction. Mr Bharat also is the CEO of Liberty Office Supplies & Equipment, Inc. A Certified Minority Business Enterprise (MBE) with New York City & New York State. Established in May 1999, Liberty provides a wide range of office supplies and work as a sourcing company for the Federal Government by being a GSA schedule holder.
Jack is Licensed as a Real Estate Broker in State of New York and in the State of Florida. He has knowledge in both residential and commercial sales. His motto “Working with Clients to achieve their real estate goals” is what drive him to be on top of his game. He is very involved in his community especially with social and educational issues. He is the proud sponsor of a local Cricket Team, Boxing and donates his time and money to various organizations that work with children, abuse victims and the elderly. He is cited by NYC Mayor’s Office, NYS Assembly and NYC Council for his leadership role in his community.
Mr Bharat has three daughters: Alicia who graduated with her Masters Of Science in Education from Queens College and is now a STEM Teacher with the NYC Dept of Education, Kayla who has recently (2024) graduated from CUNY School for Public Health with her Masters of Public Health in Environmental & Occupational Health Sciences & works as an Environmetal Health & Safety Specialist with Sloan Kettering Cancer Ctr. and Jessica who is currently enrolled as a senior at Queens College pursing her goal as a Dentist.
