A mortgage that can be transferred from the seller to the buyer, allowing the buyer to take over the seller's existing loan terms and interest rate.
Full Definition
An assumable mortgage lets a qualified buyer 'assume' the seller's existing mortgage, including its interest rate, remaining balance, and repayment terms. FHA, VA, and USDA loans are typically assumable; most conventional loans are not. In a high-rate environment, assumable mortgages become extremely valuable — if a seller has a 3% FHA mortgage and current rates are 7%, a buyer who assumes the loan saves significantly on interest. The buyer must still qualify with the lender and pay the difference between the home's sale price and the remaining loan balance (either in cash or via a second mortgage). VA loan assumptions can affect the selling veteran's entitlement.
Related Terms
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