Can Assumable Loans Help You Sell Your Home Faster?

By Kandie Frederick

Growing up on the central coast, Kandie is a third generation family in the North County and a second generation family in real estate. Joining Country Real Estate in 2000, and graduating from Cal Poly in San Luis Obispo, she brings a background of Agricultural Business to combine with her knowledge of the local real estate market. Working with her family and their decades of local real estate development, she is deeply connected to the roots of our community and its growth.

Homeowners across the country locked in interest rates of 2% to 3%over the last few years. Those low rates made staying put an easy choice, but circumstances change. Families outgrow their homes, and some owners decide it is time to downsize. When that happens, the rate attached to an existing mortgage can actually become a selling advantage.

Some loans are transferable to the next buyer. This means a buyer can take over your loan once the lender approves it and keep the low interest rate you already have. That kind of incentive can be valuable to buyers, and in some cases, they may be willing to pay more for it.

What is an assumable loan? An assumable loan allows a buyer to take over your existing mortgage, including the rate, balance, and terms, rather than starting with a brand-new loan. If your interest rate is lower than current market rates, it can make your home much more attractive.

There are several reasons buyers find assumable loans appealing. They may secure a lower interest rate than the market currently offers, enjoy a lower monthly payment, and reduce their closing costs compared to getting a new mortgage. In many cases, appraisals and reports can be waived, which saves even more money. For sellers, marketing a property with an assumable loan can set it apart in a competitive market.

Not every loan qualifies. FHA, VA, and USDA loans are often assumable with lender approval. However, conventional loans are typically not available because of a due-on-sale clause. VA loans have an additional detail worth noting: they can be transferred to anyone, not just veterans. If you are not sure whether your loan qualifies, you can check your loan documents or call the number on your mortgage statement.

Challenges and considerations. If your mortgage balance is $400,000 and your sales price is $800,000, the buyer would need to bring $400,000 as a down payment or arrange secondary financing to cover the difference. The buyer must also qualify for the assumable loan, and the process can take several months. Sellers are often required to stay actively involved by responding quickly to lender calls and emails during escrow. With VA loans, a seller may also lose the ability to use their VA entitlement again until the loan is fully paid off.

These factors are essential to understand when selling. Assumable loans are worth considering if they make your home more attractive to buyers. If you want to know whether your loan is assumable and how it could help you sell for more, just reach out. You can call me at (805) 878-2225 or send an email to kandie@countryrealestate.com. I can review your loan type and guide you through the whole process. Talk to you soon!