Published by REALTOR.com | June 4, 2025
Assuming a low-rate mortgage can save homebuyers big and potentially cut monthly payments nearly in half—but sellers benefit even more.
The American dream of homeownership is now harder than ever to achieve. While there are many reasons for this, mortgage rates, which have more than doubled in the past five years, are a big one.
With fixed rates hovering around 7%, buyers are on the hunt for creative financing options, like assumable mortgages. If they’re lucky, they’ll find a seller like this one on Reddit, who stated he’s selling his home in Melbourne, FL, and wants to do so with an assumable mortgage at a 5.25% rate.
It’s a decent deal, but potential buyers who are unfamiliar with assumable mortgages might overlook the property due to the price tag. But herein lies the beauty of these types of deals, and it’s why buyers and sellers alike should look into them.
What is an assumable mortgage—and why it could be a huge win for buyers
With an assumable mortgage, you inherit someone else’s existing home loan.
“Instead of getting a brand-new mortgage when you buy a house, you take over (assume) the seller’s current loan, keeping its original interest rate, terms, and remaining balance,” explains Martin Lehman, mortgage loan originator and managing partner at New Florida Mortgage LLC in Palm Beach Gardens, FL.
The seller essentially transfers the responsibility to the buyer, which can be an attractive option for several reasons:
Significantly lower interest rates
This is perhaps the most significant selling point of an assumable mortgage.
“If the seller’s loan has a rate far below current market rates (e.g., 3% vs. 7%), you lock in that lower rate for the remaining loan term, potentially saving thousands of dollars over time,” explains Lehman.
For example, let’s say a homeowner who purchased a $500,000 house at a 3% mortgage rate with 10% down decides to sell it three years later for $600,000, with an assumable mortgage. The new buyer would take over the remaining loan balance (around $420,949) and would need to pay the seller roughly $179,051 in cash to meet the $600,000 price. That buyer’s monthly payment would be about $1,897.
Now, compare that with a buyer taking out a brand-new mortgage at today’s average 6.87% rate; they’d pay around $3,546 a month. To say that would be a major savings is an understatement.
Potentially easier qualification
While you’ll still need to qualify with the lender, as you would with any other type of mortgage, the process can sometimes be less stringent. This is because assuming a mortgage eliminates the need for new underwriting, which may take a while.
Reduced closing costs and faster closing
You could avoid some major upfront costs, such as loan origination fees or certain lender charges associated with a brand-new mortgage.
“Also, by skipping the full, new loan approval process, you might be able to expedite the closing process,” says Lehman.
The catch? Assumable mortgages are rare and more expensive upfront
Just like all financial products, assumable mortgages aren’t perfect. They come with several limitations that are important to consider.
