With 30-year fixed mortgage rates surpassing 7 percent for the first time since May, securing a lower-rate mortgage may seem impossible. However, assumable mortgages can provide an alternative solution for homebuyers. These mortgages allow buyers to take over a seller’s existing loan, often with lower interest rates and reduced closing costs.
Assumable mortgages are typically government-backed loans, such as FHA, VA, or USDA mortgages. By assuming a seller’s mortgage, a buyer takes on the outstanding balance, repayment plan, and interest rate, offering a chance to lock in a lower rate. This option has gained popularity in recent years, with FHA-backed assumptions increasing 59 percent in 2023 compared to 2021.
However, assumable mortgages are still relatively rare, with only 14 percent of outstanding government-backed mortgages having interest rates under 4 percent. Additionally, getting an assumable mortgage rate of 3 percent or less is even more challenging.
Some real estate platforms, like Roam, can help potential buyers scan for assumable mortgage listings in their area. These platforms are available to homeowners in 16 states. Assumable mortgages offer several benefits, including reduced closing costs and the opportunity to lock in a lower interest rate.
However, there are also cons to consider, such as paying off the seller’s existing equity with cash or taking out a second home loan. The process of assuming a mortgage can be complex, and buyers must carefully review the requirements and terms of the loan.
Despite these challenges, assumable mortgages may remain a viable option for some buyers in a rising interest rate market. Experts recommend contacting the loan servicer early on to confirm the loan’s requirements and shortening the process timeline.
Source: https://www.newsweek.com/get-mortgage-rate-under-3-percent-2025-2014967