What Are Assumable Home Loans?


Quick Answer

An assumable mortgage is a home loan technique that allows a buyer to take over, or assume, the seller's home loan as a means of purchasing the seller's house; this technique can be favorable for buyers who are making a purchase during a period of higher interest rates than were in place when the seller made the initial purchase of the house, as described by Investopedia. This allows the buyer to get a more favorable mortgage rate by essentially being grandfathered in to the interest rates the seller got during a more favorable economic climate.

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Full Answer

In addition to maintaining the same interest rate, the assumed mortgage typically doesn't have other term changes, notes Zillow. However, the original lender of the mortgage may require the right to approve of the buyer.

Aside from securing a lower mortgage rate, buyers in an assumable mortgage scenario also typically have fewer closing costs to contend with. The seller also benefits from this arrangement, mainly in the form of competition against other sellers in the real estate market. Assumable loans are often seen as beneficial to buyers, so more buyers are likely to be interested in a home that comes with an assumable mortgage. Additionally, lower closing costs could mean a higher selling price for the home.

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