Assumed mortgages, in which lower interest rates are transferred from homeowners to buyers, are making a comeback but the process can be difficult.
NEW YORK — Assumable mortgages are one way homebuyers can get lower interest rates than the current rates of about 7 percent, and startups like Roam list homes with low-interest loans that can be assumed and help homebuyers go through the process.
Realtor.com also makes it easier for buyers to find properties that are available for mortgage assumption by tagging and making them searchable on its website. Other smaller companies and real estate agents also create listings of assumeable properties and charge homeowners a fee for helping them through the process. Data and Technology Companies Intercontinental Exchange said about 23% of active mortgages, or 12.2 million, are available for assumption, but assumptions are a small fraction of home sales.
However, the number of assumeable mortgage sales is on the rise, with 6,000 sales completed in 2023, up 139% from 2022. Approximately 3,896 assumers have been completed so far in 2024. Intercontinental Exchange About two-thirds of transferable mortgages with interest rates below 4% were taken out in the past three years. But there are hurdles to obtaining a transferable mortgage.
“The prices of many homes have soared and some of the assumed loans have been paid off, which can create a big gap between the purchase price and the remaining mortgage,” The New York Times reported. For buyers, that means making a bigger down payment or qualifying for a second mortgage to make up the difference.
Another hurdle is the process itself, as mortgage servicers can take a long time to process this type of sale.
Source: The New York Times (05/09/24) Bernard and Tara Siegel
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