When it comes to buying a home, you want to save as much money as possible. And one potential way to do that — if the circumstances allow — is getting an assumable mortgage.
But many people don’t even know what an assumable mortgage is, let alone when it’s applicable and how it might help them save on their home purchase.
A recent article from realtor.com answers frequently asked questions about assumable mortgages, including:
- What is an assumable mortgage? An assumable mortgage is a type of loan that allows the buyer of the home to take over the seller’s existing mortgage, instead of applying for a new mortgage. Currently, there are three types of loans that are considered assumable — FHA loans, USDA loans, and VA loans.
- How do assumable mortgages benefit buyers? Assumable loans can benefit buyers in a variety of ways, including potentially lower interest rates, fewer upfront costs, and a shorter loan life, which could be significant, depending on how long the seller has been paying off their mortgage.
- When should buyers opt out of assumable mortgages? While assumable mortgages often benefit buyers, that’s not always the case. There are instances when buyers should consider opting out of an assumable mortgage, like when the assumable mortgage has a higher interest rate than getting a new loan, the home has appreciated significantly, or the seller has a VA loan and needs to keep his or her benefits, as VA benefits stay with the loan, not the veteran.