Real Estate Term of the Day: Assumable Loan

Real Estate Term of the Day: Assumable Loan

ASSUMABLE LOAN – a mortgage loan that allows a new home purchaser to undertake the obligation of the loan with no change in loan terms.  Most FHA and VA (government backed) mortgages are assumable (Barron’s Dictionary of Real Estate Terms)

Benefits for the Buyers:

  • Lower interest rate & lower monthly mortgage payment
  • Significantly lower closing costs

Benefits for the Sellers:

  • Buyers maybe willing to pay a premium for an assumable loan
  • The demand for your home can be greater than other homes that can’t offer an assumable loan

In our current market with interest rates at historical lows, mortgage assumptions are not very common.  But if interest rates increase to levels seen in the 1980’s or 1990’s mortgage assumptions could become very common.

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