Assumable mortgages are apparently making a comeback amid high mortgage rates.
They allow a home buyer to take over the seller’s mortgage, including its interest rate and remaining balance. Roughly 25% of mortgages in the U.S. are assumable. They gained popularity in the 1980s when rates spiked above 18%. 13,000 mortgages were transferred last year, double 2023’s level and nearly four times 2022’s.
Assumable mortgages come with several limitations. A loan can be assumed only if a down payment is made to cover the difference between the new purchase price and the existing loan amount. Only certain mortgages backed by the feds can qualify.
Several start-ups want to make it easier to get an assumable mortgage. RetroRate lets buyers and agents search for homes with assumable mortgages and then ranks the listings based on each loan’s financial appeal. Likewise, Roam allows buyers to search for homes with assumable mortgages.
I have a child, with the golden handcuffs of a low rate mortgage not wanting to sell because he cannot get a better deal in the current environment.