Could You Benefit from an Assumable Mortgage?
When selling your home, you’ll want to take advantage of any competitive edge that could get you more interest. However, did you know you may be overlooking an appealing non-apparent feature?
You could turn your existing mortgage, interest rate and all, into a selling point for your home! If you have a government-insured mortgage on your current home, you might be eligible to offer an Assumable Mortgage, and you could pass your low rate on to the next homebuyer. And if your rate is lower than what’s available today, you’ll be sweetening the deal for prospective buyers!
What is an Assumable Mortgage?
An Assumable Mortgage allows the owner of a home to transfer their existing mortgage over to a new homeowner. The new homeowner will take on the debt with many of the existing loan terms, including the interest rate and current balance.
Who Can Offer an Assumable Mortgage?
Your ability to offer an Assumable Mortgage will depend on your loan servicer and specific loan terms. If your loan is backed by the government, you might be eligible to have the buyer of your home assume your mortgage. Government loans include FHA, VA and USDA loans.
You must ask your servicer about the requirements for the buyer and any possible liabilities and continuing obligations for yourself.
To see if you can offer an Assumable Mortgage, contact your current loan servicer.
Why Would You Offer an Assumable Mortgage?
When interest rates are high, Assumable Mortgages can be attractive to potential buyers who would not otherwise be able to access low rates in shopping for a new loan.
Buyers may also prefer the experience of assuming a mortgage over shopping for new financing. They will save time in comparing mortgage companies to get the best interest rate because the Assumable Mortgages will continue with the existing lender.
What Down Payment is Required to Assume a Mortgage?
Assuming a mortgage may come with some steep down payment requirements.
To understand what down payment the buyer will need, subtract your remaining loan balance from the sale price. For example, if you’re selling for $400,000 and you have $300,000 left on your mortgage, the buyer would need to put at least $100,000 down to assume your mortgage.
This means that Assumable Mortgages are most popular in two situations. First, when you haven’t built up much equity in the home, often because you haven’t owned it for very long. And second, when the buyer is coming in with a large down payment.
Questions to Ask Your Loan Servicer
The terms and requirements of your Assumable Mortgage will be determined by your servicer. Ask your loan servicer the following to get the process started.
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Does your servicer allow Assumable Mortgages?
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Are you liable for any of the debt following the sale of your current home?
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What is the criteria for the potential buyer to qualify for this option? (Credit score, appraisal required, etc.)
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Can the buyer take out a second mortgage to help with their down payment?
If you have a VA loan, make sure you ask about these details too.
We’re Here as a Resource
While Lennar Mortgage can’t answer questions specific to your current mortgage, we’re happy to offer knowledge that may help you make an informed decision.
If you’re looking to upgrade to a new Lennar home, we can help! Our Loan Officers are experienced in financing new construction, with seamless communication to and from Lennar. Start your path to your Lennar dream home: Get pre-qualified today!
*Not an offer to provide or facilitate a mortgage assumption, make a determination on eligibility or give financial advice. Please consult your current loan servicer, not Lennar Mortgage, LLC, on mortgage assumption eligibility, restrictions, terms and conditions. This is not a commitment or offer to lend, but provided for informational purposes only. Lennar Mortgage, LLC - NMLS # 1058. Copyright © 2023 Lennar Corporation and Lennar Mortgage, LLC. All rights reserved. Lennar, the Lennar logo, Lennar Mortgage and the Lennar Mortgage logo are U.S. registered service marks or service marks of Lennar Corporation and/or its subsidiaries.