For many homebuyers, today’s mortgage rates may stand in the way of finalizing a purchase. Some are discovering a little-known option that could help.

Assumable mortgages, once common in the high-rate eras of the 1970s and 80s but used less frequently in recent decades, are getting new attention with buyers looking to sidestep high interest rates. These loans allow a buyer to take over the seller’s existing mortgage, pending lender approval, with the same rate, remaining balance.^1,2 and repayment schedule.

Although assumable loans won’t apply to all buyers or properties, they are emerging as one way for buyers to get an edge without relying on lower interest rates. At a time when affordability remains a hurdle for some, creative homebuying strategies could help more take their next step toward homeownership. 

What is an assumable mortgage?

Assumable mortgages can offer value when interest rates are high. Instead of taking out a new loan at today’s rates, a buyer may assume the seller’s existing mortgage — along with its original terms and lower interest rate.

These loans aren’t new: Their value has merely increased. Mortgages locked in during the early 2020s may carry interest rates below 4%, compared to the average 30-year fixed-rate mortgage today that hovers near 7%. This rate gap can be a selling point, especially in a slow market. 

Read more: Will 2025 be the year of the first-time home buyer?

The fine print

Not all mortgages are assumable, however. Most eligible loans are backed by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the U.S. Department of Agriculture (USDA).^3,4,5 Conventional loans, which are not backed by the government, are not typically assumable unless the lender provides an exception.

Buyers must qualify first. This means proving income, undergoing a credit check, and meeting the lender’s debt-to-income guidelines. These requirements are like those for obtaining a traditional mortgage: Would-be homeowners must have their financials in order.

If the seller owes significantly less than the sale price, the buyer must cover the difference, typically with cash or a secondary loan. This could make assumable mortgages a better fit for buyers with liquid assets or outside financing (like another mortgage or loan).

Homecoming takes a while

Even if a mortgage is assumable, the process is neither automatic nor guaranteed. Buyers must qualify with the lender, and government-backed loans come with specific loan approval requirements. For example, VA loans can only be assumed by someone who meets VA eligibility.

Buyers planning to assume a mortgage should approach it like any other deal: with eyes open and a team of professionals to help. This could include an agent familiar with government-backed financing and a loan officer who understands how to navigate slower-moving approvals. Depending on the specifics, it may also be helpful to explore other strategies to make a home purchase more affordable. This could take the form of seller concessions or structuring the deal to gain a buyer’s edge.⁶

Read more: Forget buying a first home — buy a first property instead

House hunters

The clearest benefit of assuming a mortgage is the interest rate. A buyer taking over a 3% loan instead of a 7% could reduce monthly payments by hundreds of dollars. That savings compounds over time, potentially cutting tens of thousands off the total borrowing cost. In a high-interest environment, this savings could go a long way.

Assumable mortgages can also strengthen a seller’s position, especially when their low-rate loan becomes an asset in the negotiation. There are potential tradeoffs, however. If the seller owes $250,000 on a home listed for $400,000, the buyer will need to bridge that $150,000 gap through cash or a second loan. This hurdle may make it harder to pursue an assumption, especially for first-time buyers without significant equity or savings.

Timeline can also be a factor. These loans tend to take longer to process than a conventional mortgage. For buyers on a tight schedule, that delay may be a challenge. Still, for buyers with flexibility and strong finances, an assumable mortgage may offer long-term advantages that conventional loans can’t often provide. 

Closing the deal

Assumable mortgages aren’t a perfect fix for high interest rates. They require documentation, patience, and often a sizable amount of cash upfront. For buyers who qualify, they offer something rare in a high-rate environment: The chance to borrow like it’s 2021. 

This edge can go a long way, especially for buyers who see buying their first property as part of a bigger financial plan. In the right situation, an assumable mortgage doesn’t just lower costs, it could create a path forward that’s brighter than a sunroom.