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  • Writer's pictureStephen Boatman

How to find a 3% mortgage rate in an 8% mortgage rate environment? (Assumable Mortgage)

Updated: Jan 22

The only way I know how to find a 3% mortgage rate in this market outside of a family loan is through an assumable mortgage. An assumable mortgage is when you take over the current homeowners' mortgage after purchasing their home. This means that if you buy a home from someone with a 3% assumable mortgage, you could take over their mortgage payments with a 3% interest rate! It sounds great, but there are a few key points to be aware of.

  1. Only FHA, VA, and USDA loans are assumable, which means the odds of your dream home having an assumable mortgage are low.

  2. You must qualify for the mortgage you will be assuming. Which means that your credit and income need to be high enough to be in line with the lenders standards for the mortgage you will take over.

  3. You take over the sellers mortgage timeline. If they are 12 years into the 30-year mortgage, you take over an 18-year mortgage.

  4. Assumable mortgages are only for primary residences, not investment properties.

  5. You need to pay the difference between the mortgage and the home's sale price, also known as the home equity. You can pay the equity with cash or via a separate loan. Remember that loans in our current market will be expensive, but it may be worth the effort depending on your circumstances.

Example 1

You want to buy a home for $600,000 that has a $300,000 assumable mortgage on it. However, to purchase the home, you need to come up with $300,000 to cover the homeowner's equity before assuming their mortgage. That is a high hurdle, but it may be possible if you sell a home with a large amount of equity simultaneously.


Example 2

A couple purchased their home in 2021 with a low interest rate, but their home equity hasn't grown much. This means you may see a $600,000 home with a $580,000 assumable mortgage and only $20,000 of equity is needed to complete the transaction.


Assumable Mortgage


More Resources
  • Assumable mortgages can be searched through a website called Roam, which can be found HERE. Note that this website doesn't cover NC or most other states, but you could use a keyword search on Zillow to target the word assumable if the owner knows that their home has an assumable mortgage.

  • (18-minute) YouTube video going into more detail HERE

  • (20-minute read) Blog found HERE

Summary

Assumable mortgages are an interesting part of the real estate lending market but come with their fair share of variables to consider. I'd recommend speaking with a professional before making decisions regarding assumable mortgages.


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