Key Takeaways
- An assumable mortgage lets you take over the seller’s current loan with the same terms and interest rate.
- FHA, VA, and USDA loans are usually assumable; conventional loans typically are not.
- Assumable mortgages can save money when current interest rates are higher than the existing loan’s rate.
An assumable mortgage is one that allows a new borrower to take over an existing loan from the current borrower. Typically, this entails a home buyer taking over the home seller’s mortgage.
The new borrower — the person ‘assuming’ the loan — is in exactly the same position as the person passing it on. They’ll have the same terms and conditions, the same mortgage rate, the same remaining repayment period, and the same mortgage balance.
In other words, it’s effectively swapping one borrower’s name on the mortgage agreement for another.
In this article (Skip to...)
- How assumable mortgages work
- Why assume a mortgage?
- Assumable mortgage pros and cons
- Assumable mortgage process
- FAQ
How does an assumable mortgage work?
An assumable mortgage lets you take over a seller’s loan, including their interest rate, monthly payment, and payoff timeline. It sounds simple, but there are a few important catches.
Check your home buying options. Start hereFirst, not all loans are assumable. Second, you still have to qualify with the lender. And third, you’ll likely need a significant down payment since the seller’s loan balance won’t cover the full home price.
In the right scenario, assuming a mortgage can save you money, especially if the seller’s rate is much lower than today’s. But it’s not a fit for everyone, so weigh the pros and cons before moving forward.
Why use an assumable mortgage?
In today’s high rate market environment, an assumable mortgage can be a valuable way to secure a lower rate than what’s currently available.
One of the biggest advantages is the chance to take over a loan with a rate well below today’s averages, saving you money over the life of the loan.
Verify your mortgage eligibilityTake a look at one example.
According to Freddie Mac, the all-time low weekly mortgage rate occurred in January of 2021, when it dipped to 2.65% for a 30-year fixed-rate mortgage.
When this article was updated on July 15, 2025, Freddie Mac’s weekly average stood at 6.72% for a 30-year mortgage. If you’re offered an assumable mortgage at 2.65%, you’d likely be over the moon.
Your monthly principal and interest payments at 6.72% would be $2,586 on a $400,000 loan. But they’d only be $1,612 at 2.65%.
That’s a saving of $974 per month or $11,688 per year — every year.
That’s the fantastic advantage assumable mortgages can offer. But few scenarios will play out exactly like this. So we also need to look at the restrictions and downsides of assumable home loans.
Assumable mortgage pros and cons
For years, assumable mortgages flew under the radar because falling interest rates made starting fresh with a new loan more attractive.
But as rates climbed back up again, taking over an existing loan with a lower rate could become a smart option for some buyers.
Check your home buying options. Start hereAssumable mortgage pros
- Lower interest rates: Lock in the seller’s older, potentially lower rate as rates rise.
- Capped closing costs: FHA, VA, and USDA loans limit closing costs on assumptions, often without needing a new appraisal.
- Long-term savings: Borrow less over a shorter period, saving money on interest compared to a new mortgage.
Assumable mortgage cons
- Higher down payment: You might need a larger upfront payment than with a new loan.
- Mortgage insurance: FHA and USDA loans come with ongoing mortgage insurance premiums; VA loans do not.
- Limited loan types: Conventional loans usually aren’t assumable, so if you qualify for one, it may be a better choice than assuming a government-backed loan.
Assumable mortgage process
With mortgage rates currently high, finding a home with an assumable mortgage can be a smart way to secure a lower interest rate than what’s available today.
While you won’t be able to shop around for a new rate — since you’re taking over the existing loan’s terms — that’s the whole point: locking in a better deal in a high rate market.
Get started on your mortgage preapproval. Start hereThe process is very similar to applying for a new mortgage. You’ll need to complete a loan application and provide documents such as:
- Income and employment information
- Previous 2 years tax returns
- Recent paystubs
- Recent bank statements
- Proof of other assets, like retirement and investment accounts
The mortgage underwriter will also pull your credit report and credit score to make sure you meet minimum credit requirements for the loan type being assumed.
Finally, you’ll have to show you can afford the down payment and closing costs, whether using money in your bank account, a second mortgage, or another source of funds like a down payment assistance program.
If you’re looking to remove someone from your current mortgage without refinancing, here’s a helpful guide on how to do that.
Assumable mortgage FAQ
Check your home buying options. Start hereThe same way you qualify for any other mortgage. You’ll need to apply and get approved for the mortgage by meeting the lender’s requirements for credit, debt-to-income ratio, down payment, income, and assets.
You’ll have to pay closing costs on a loan assumption, which are typically 2-5% of the loan amount. But some of those may be capped. And you’re unlikely to need a new appraisal. So you may pay less on closing than a ‘typical’ home purchase — but only a bit less.
Usually. And it’s often more than with a new mortgage, because you’ll probably be covering some or all of the present owner’s past payments. But you might not need one if you’re assuming a recent VA or USDA loan because the lender doesn’t require a down payment. So it comes down to your negotiations with the owner.
Yes. Assumable mortgage closing costs are close to those for a traditional mortgage, though you may save a few hundred dollars or more by skipping a home appraisal.
Certainly. Anyone can assume your mortgage with the lender’s consent. But you may be inquiring about a “simple assumption,” where the lender knows nothing about it. Some borrowers do come to these private arrangements, but they’re loaded with risk — so read the relevant section above. Lenders often have special assumption arrangements for surviving family members if a borrower dies.
Yes. But the same cautions apply if you’re hoping to do a ‘simple assumption’ (see the previous FAQ).
A ‘non-qualifying assumable mortgage’ is one that was originated prior to December 14, 1989. Since most mortgages have a loan term of 30 years or less, non-qualifying assumable mortgages are more or less extinct.
It certainly can be. But, like all similar questions, the answer will depend on your circumstances and needs. If you get the chance to assume a mortgage at an appreciably lower rate than you can get elsewhere, you should definitely run the numbers.
What are today’s mortgage rates?
An assumable mortgage is especially attractive when interest rates are rising.
Right now, rates are high compared to recent years, which means locking in a lower rate through an assumable loan could save you money.
With a new loan, you can shop around for the best rate—but given today’s market, finding a significantly better deal might be challenging.
That makes assumable mortgages worth considering, especially if the existing loan has a rate well below current averages.
Time to make a move? Let us find the right mortgage for you
