What is an assumable mortgage?

An assumable mortgage refers to a type of mortgage that permits a buyer to take over the mortgage obligation from the seller. When a seller transfers an assumable mortgage to a new buyer, the buyer benefits by maintaining the existing loan terms, including the interest rate and repayment schedule. This can be advantageous in a rising interest rate environment, as the buyer can obtain better terms than those currently available in the market.

This concept is particularly important in scenarios where the existing mortgage has favorable terms that the current market does not offer. For the seller, it can enhance the attractiveness of their property to potential buyers. Generally, assumable mortgages are commonly found in certain types of loans, like FHA and VA loans, but they are not exclusively limited to those categories, making the correct choice significant in understanding broader real estate financing options.