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Assumable Mortgage

Is taking over the seller’s 3% loan worth it?

Some sellers have a low-rate loan you can take over instead of borrowing at today’s rates. Enter the price and the seller’s loan details to see how much interest you’d save, what it costs, and how much cash you’d need at closing.

  1. Some loans can be taken over

    With an , you take over the seller’s mortgage, keeping its rate and remaining years, instead of getting your own. This mainly works with , and you still have to qualify.

  2. You pay the seller’s equity in cash

    The loan only covers what the seller still owes. The rest of the price is the seller’s , and you pay it at closing. Example: a $500,000 price with a $380,000 balance means bringing $120,000, plus fees.

  3. We compare it to a new loan

    We add up the interest on the seller’s loan and on a new loan at today’s rate for the same amount and the same years left, then subtract the one-time assumption fees. What remains is what assuming saves you.
The listing agent can usually tell you the seller’s loan type; the seller’s latest mortgage statement has the balance and rate. For VA assumptions, see VA loans: funding fee, entitlement, and assumability.
Seller’s loan type
The home and the seller’s loan

What you’d pay for the home and what the seller still owes. The seller’s mortgage statement shows the balance, rate, and payoff date.

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$
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Your other option and fees

What a new mortgage of your own would cost today, for comparison.

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yr
%

Assume the loan: you come out ahead by

$229,899

Assuming the seller’s 3.25% loan saves $232,099 in lifetime interest vs a new 6.75% loan of the same size over the same remaining term (you cover the equity gap in cash). After $2,200 in assumption fees, you come out $229,899 ahead. You’ll need $122,200 in cash at closing ($120,000 equity to the seller + $2,200 in fees).

Cash needed at closing

$122,200

$120,000 to seller + $2,200 fees

Payment if you assume

$1,852

at 3.25% for 25yr 0mo

Payment with a new loan

$2,465

at 6.75% for 30yr

Monthly difference

$613

lower if you assume, vs a new 30-yr loan

Interest saved over the loan

$232,099

$407,639 − $175,540 (same term)

What this means

Over the 25 years left on the seller’s loan, you’d pay about $175,540 in interest at 3.25%, compared with $407,639 on a new 6.75% loan for the same amount and length. Your monthly would be $1,852, compared with $2,465 on a new 30-year loan. After $2,200 in one-time assumption fees, assuming leaves you about $229,899 ahead. You’d still need cash: the loan only covers the seller’s $380,000 balance, so you’d bring $122,200 to closing, including $120,000 (24% of the price) for the seller’s .

This compares interest and assumption fees only, and assumes you’d put the same cash down either way. If you can’t cover the equity in cash, you’d need a second loan, usually at a higher rate, which isn’t included. You also still have to qualify with the seller’s .

What would change the answer

Today’s rate rises to 7.25%assuming comes out ahead by$266,259
Today’s rate falls to 6.25%assuming comes out ahead by$194,283
The seller’s loan has 5 fewer years leftassuming comes out ahead by$173,969

After fees. With your current numbers, assuming comes out ahead by $229,899.

How loan assumption works

Assumable loans are almost always VA, FHA, or USDA loans. Most conventional loans contain a that requires the full balance to be paid when the property transfers.

You still have to qualify. The lender will run your credit, verify your income and assets, and either approve or deny the assumption. Standards are similar to a new loan.

You inherit the seller’s remaining term. If the seller is 5 years into a 30-year loan, you start with 25 years left, not a fresh 30. This often shrinks the savings substantially because you get fewer years at the low rate.

If the home has gone up in value, the sale price often far exceeds the loan balance. You make up this equity gap in cash at closing. Example: $500k home with $200k loan balance = you bring $300k cash. This is why assumptions often only work in flat markets or with a second mortgage to bridge the gap.

If a non-veteran assumes a VA loan, the seller’s VA stays tied up until the loan is paid off. Most veteran sellers won’t agree to this. A veteran buyer can free the seller’s entitlement only by substituting their own entitlement as part of the assumption.

Millions of homeowners locked in sub-3.5% rates in 2020-2021, and with new-loan rates well above that, those loans are worth a lot, which is why assumptions picked up in 2024-2026. The hard part is finding a deal where the equity gap is bridgeable.

The seller’s servicer must approve the assumption, which typically takes 30-60 days. Costs modeled at each program’s maximum: VA, a $300 processing fee (VA has also allowed a regional add-on since 2024) plus the 0.5% unless you’re exempt; FHA, a processing fee capped at $1,800 (no new upfront ); USDA, a new 1% upfront guarantee fee on the remaining balance plus the servicer’s processing fee (not capped by USDA, not included here). For FHA the servicer must complete a full creditworthiness review. USDA buyers must also meet USDA’s income and property eligibility rules. Get loan-level details from the seller’s servicer before going under contract.

Results are estimates based on your inputs and the assumptions on this page, not quotes or advice. A lender, servicer, or tax advisor will give you different numbers. Disclaimer

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Terms used on this page

The loan types a buyer can take over, and the fees and approvals that come with them.

Assumable mortgage
A loan a buyer can take over from the seller, keeping its rate, balance, and remaining years. The buyer still has to qualify with the seller’s loan servicer.
VA loan
A mortgage backed by the Department of Veterans Affairs for eligible veterans, service members, and surviving spouses. Anyone who qualifies can assume one, veteran or not. More
FHA loan
A mortgage insured by the Federal Housing Administration that allows low down payments. FHA loans are assumable by a buyer who passes the servicer’s credit review. More
USDA loan
A government-backed loan for homes in eligible rural and some suburban areas, with income limits. Assuming one adds a new 1% upfront guarantee fee. More
Due-on-sale clause
Language in most conventional mortgages that requires the full balance to be paid when the home is sold. It’s why most conventional loans can’t be assumed.
Home equity (the equity gap)
The sale price minus what the seller still owes. When you assume a loan, you pay this difference in cash at closing or with a separate second loan.
Principal and interest
The loan part of your monthly payment. Principal pays down what you borrowed; interest is the lender’s charge for lending it. Taxes and insurance are separate.
VA funding fee
A one-time VA fee charged as a percentage of the loan. For an assumption it’s 0.5% of the balance, and veterans receiving VA disability compensation are exempt. More
VA entitlement
The part of a VA loan the government guarantees for a veteran. If a non-veteran assumes the loan, the seller’s entitlement stays tied up until the loan is paid off. More
Loan servicer
The company that collects payments and manages the loan. For an assumption, it reviews your application and approves or denies it.

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