You’ll start hearing more about mortgage assumptions in this market.

Today I’ll talk about a term you're going to start hearing more in the coming weeks: mortgage assumption. A mortgage assumption is when you take a mortgage that you currently have and transfer or “assume” that mortgage to the person buying your house. This is especially important if you're thinking about selling, but also if you're thinking of buying because you could potentially assume a very low rate from somebody's mortgage. 


"Mortgages can be transferred while not changing the interest rate."


This program is available with FHA, VA, and USDA loans, but it’s generally not available with conventional loans. Let’s say the seller took out a mortgage in 2021 at a 3% rate. Rates are now at about 6.5%, so if you’re able to pay the seller the difference between what the property is worth and the amount of the mortgage, you may qualify to take over the payments on that mortgage. The big benefits are that your closing costs are less, and the mortgage won’t be for 30 years. You may only have 28 or 29 years left on it.


I had a client who bought in October of last year, and the payment on his $400,000 home was $1,000 less on the monthly payment. By assuming a mortgage of somebody who has a rate of 3% or below compared to a rate of 6% or above, the difference in your payment is hundreds of dollars, possibly up to $1,000. 


If you have questions on how to assume a mortgage, call me. I'd love to teach you more.