An assumable mortgage is a loan that can be transferred from one party to another, allowing the new borrower to take over the remaining payments on the mortgage loan, keeping the existing loan rate, repayment period, principal balance, and other terms intact. Not all loans are assumable, however, and the lender must approve the assumption in most cases.

At Assume a Rate, the process of obtaining an assumable mortgage is straightforward and efficient. It begins with a Discovery Call, where we assess your needs and provide essential information. Next, we assist you in Property Selection by curating listings that match your preferences. Once you find your ideal home, we guide you through Offer Submission. The Assumption Process is where we work with the existing mortgage servicer to secure approval. Finally, we facilitate the Closing and Transfer, ensuring a smooth transition of the assumable mortgage. Our step-by-step approach makes home ownership more accessible and affordable.

An assumable mortgage is a loan that can be transferred from one party to another with the initial terms remaining in place. Government-backed loans, like FHA, VA, and USDA loans, will generally allow for assumptions and typically don't include the "due on sale" clauses that would prevent the loan from being assumed. However, the lender must approve the assumption in most cases, and the buyer must qualify for the loan and have the ability to repay the debts. Novation agreements are generally more desirable as they eliminate liability for the original borrower and result in the full transfer of the mortgage to the new homebuyer.

Take, for instance, the current median home sale price in the USA, which is $407,000. Opting for a new mortgage at a 7.5% interest rate, instead of assuming a 2.5% interest mortgage, translates to a monthly savings loss of $1,238. Over the first 5 years, you'd miss out on $100,000 in interest savings, and throughout a 30-year period, that figure climbs to $445,000. These numbers underscore the considerable financial impact of your choice in home financing.

Assumable mortgages present several advantages for buyers. The most significant benefit is the ability to obtain a lower interest rate, as compared to current market rates. For instance, in the scenario presented, the existing mortgage has an interest rate that is more than half that of the current market rate. This translates to huge monthly savings and increase in purchasing power. In addition fees are typically lower on assumable loans than they are on new originated ones.

Assumable mortgages have disadvantages that have limited their popularity among buyers and lenders. Firstly, banks do not typically earn significant additional revenue from such loans, beyond any administrative or processing fees. This can make the process very lengthy if you try to take this on without experience. Additionally, many assumable loans do not provide sufficient coverage for the full purchase price of the property, which can create additional financial challenges for buyers. Furthermore, identifying properties for sale that have assumable mortgages can be a complex and time-consuming process, requiring additional research and due diligence on the part of buyers.

The person assuming the mortgage would have to find coverage to fulfill the difference between the sales price and the remaining loan balance. Due to the difficulty in getting coverage, we select properties that are at a higher loan-to-value. For example, 95% LTV (Loan to Value) on a $407,000 property price would be a $386,650 loan amount and would mean the buyer would need to come up with $20,350.

As a seller, a novation assumption/agreement can offer several benefits for the sale of your property. One of the main advantages is that it fully transfers the mortgage to the new buyer, which can make the process simpler for everyone involved. Additionally, it can make the home more attractive to potential buyers and potentially result in a faster sale and a higher sale price. Another added benefit of novation is that it almost always eliminates the need for an appraisal, saving time and costs for the parties involved.

While there are some disadvantages to a novation agreement, such as lender approval and additional research required, it is important to note that these are standard procedures in any real estate transaction. Additionally, the lender may not earn additional revenue from the loan, beyond any administrative or processing fees so one again the process can be lengthy.

We are a company operating in the financial/lending side of real estate, and we understand that navigating a high-interest, slow environment can be challenging for buyers, sellers, and realtors. To assist them in making informed decisions, we are providing valuable data, information, and expertise in getting these deals done. Our goal is to add value for these groups and help them navigate the market. We make money on closed transactions and our fees vary depending on the type of assumption.

If you have any questions, feel free to reach out via email at info@assumearate.com or call/text 1-866-683-0785, and we'll do our best to help you.